Who is closing the ESG education gap in sustainable finance?

• Demand for ESG skills is outpacing supply, with 77% of financial professionals reporting a sustainability skills shortage at their organisation.
• Capital Monitor analysis finds that less than a fifth of ESG staff at top banks and asset management firms have formal education in a relevant field.
  
• Finance execs are snapping up ESG certificates through online learning while business schools are starting to integrate ESG education into their courses.

The rapid rise in demand for ESG jobs, particularly within the financial sector, is not being matched by the number of staff with appropriate education, according to a January 2022 report from Toronto Finance International (TFI), which assessed the sustainability skills gap within the financial sector.

The research focuses on Canada, but its findings reflect a wider issue across the globe: the surge in demand for tailored ESG products is outpacing opportunities for developing the wide-ranging skills required across banking and asset management.

Every one of the 100-plus finance professionals surveyed by TFI, a promoter and hub for Toronto’s financial sector, agreed that development of sustainable finance skills was important. Nearly seven in ten said the supply of sustainable finance skills within their organisation did not meet demand, while 77% said the shortage was having at least a moderate impact on their organisations.

There is no clear consensus on which specific credentials are the most desirable for an ESG role in finance – aside from skills that intersect financial knowledge with an understanding of environmental, social or governance issues.

According to the TFI report, called ‘Taking the Lead in Sustainable Finance’, the single most sought-after requirement (selected by 43% of respondents) is prior sustainable finance experience, which remains in relatively short supply.

Lack of relevant education among ESG professionals

The number of ESG employees working in finance with a formal education in a field related to sustainability is fairly small.

Just 13% of nearly 3,700 senior ESG staff members at the world’s top 100 largest banks and 100 largest asset management firms hold a degree related to ESG, sustainability, stewardship, diversity, the environment or climate change, according to Capital Monitor’s analysis of LinkedIn profiles provided by sister company GlobalData.

Of that 13%, around one in ten (9%) had a qualification that was not a bachelor’s degree related to these areas, including higher or further education degrees such as MAs, MBAs or specialist training courses.

Closing the ESG skills gap – who’s taking the lead?

There does, though, appear to be a shift towards integrating ESG or sustainability courses within traditional business courses. According to a New York Times article from November, there has been an “explosion” of interest in ESG issues at business schools, where professors at Yale, for example, have begun to incorporate sustainability lessons into regular financial courses over the past couple of years.

Another option for those seeking ESG certification is via online learning. One internationally recognised qualification is the Certificate in ESG Investing, provided by the Chartered Financial Analyst (CFA) programme. The ESG course was first launched in 2019 by CFA Society UK, before it was taken over by the CFA Institute and marketed globally in 2021. It has seen a surge in popularity since its inception.

Nick Bartlett, head of practice analysis at the CFA Institute, shared the figures with Capital Monitor: “Since product inception, we have seen more than 15,000 candidates registered for the Certificate in ESG Investing, with the number increasing steadily in recent months. In December 2021, for example, we saw two and a half times more candidates than December 2020."

The large majority of these candidates are from the UK, followed by the US, he adds, “and some of the biggest employers of these candidates include HSBC, UBS, Axa and Pictet [Asset Management]”.

The UN Environment Programme Financial Initiative (UNEP FI) also offers a series of training courses on sustainable finance for its members, which were taken by 4,201 participants in 2021. It saw a 16% increase in the number of people trained last year compared with 2020, and a 34% increase compared with 2019.

Student conversions to sustainable offerings are also increasing: the number of conversions to sustainability courses increased by 413% between 2019 and 2021, according to education provider 2U, which includes the University of Cambridge Sustainable Finance course in its portfolio.

Since launching in 2020, hundreds of students have taken the latter course, which saw 10% year-on-year growth in participants in 2021, according to 2U. It has a similar course offering in the US, at Yale University.

ESG education: Back to school

While most employees at the top banks and asset management companies received their relevant degree a number of years before taking the job, a handful have received it either in the same year or after starting in their ESG role, the data shows.

One example in the study is a staff member who has worked in a ‘sustainable’ role at a bank for 29 years, and in 2006 completed an MA in environmental resources management. Another is an employee who worked as a socially responsible investing (SRI) specialist at a bank for 12 years, and after nine years in the job received sustainability leadership certification from the University of Cambridge. Meanwhile one individual was head of ESG investment at a major asset management firm for three years before receiving the same Cambridge qualification last year.

Clearly, there is a market for ESG education even among those already occupying senior positions in the field.

That employees in influential institutions are going back to school for ESG training highlights another option for closing the skills shortage: training existing staff. Although the TFI’s report finds that many organisations do not have any "formal, internal upskilling programmes" relating to ESG, a few examples stand out, such as Spain’s BBVA, which in September 2020 announced it was the first major bank to enforce mandatory sustainability training for all its staff. Nearly 75,000 of the bank's employees have undergone this training in less than a year.

Alberto González, learning discipline leader at BBVA, says: “Our goal is that by the end of the year, all employees will have a basic knowledge of sustainability.” Now, with the “foundations in place for a large part of the workforce”, the bank is focused on strengthening the training on offer and developing new specialised content for key staff members through programmes provided by the universities of Cambridge, Oxford and Yale.

Staff that have already undertaken specialist training at the bank, provided by the University of Oxford, have been taught about “the science of climate change, the drivers of sustainable finances and new trends, and the role of regulatory agents in promoting sustainability”.

A bank that offers similar training is Australia’s Westpac, which at the end of January 2022 said it was partnering with Monash University to teach staff how to advise clients on ESG issues.

In Capital Monitor’s database of ESG-linked compensation, one bank, HSBC, incorporates sustainability training within its compensation policy. The bank reports on how 93% of its managers completing this training translates to a cash bonus for its CEO, showing a clear incentive for internally upskilling employees.

With younger students increasingly selecting sustainability courses from the get-go, and seasoned professionals retraining en masse, there is reason to believe that the ESG skills gap will close sooner rather than later.

Read more: How banks are filling ESG job roles