Growing complexity, the need for differentiation, and regulation are factors in the recruitment drive
May 3, 2023, LONDON—Asset managers in Europe looking to upgrade their environmental, social, and governance (ESG) expertise are having to compete in a tight market for talent, according the latest Cerulli Edge—Global Edition.
“Asset managers are seeing more demand for than supply of ESG talent,” says Justina Deveikyte, director, European institutional asset management research.
Around 61% of the asset managers across Europe strongly agree or agree that there is a war for talent in the ESG sales domain.
As the ESG market expands and products gain in sophistication, regulators and investors are demanding greater transparency and requiring expertise from asset managers. In response, managers are having to upskill existing employees or recruit talent.
Fund selectors increasingly want to see sustainability integrated into all areas of asset managers’ business and their decision-making processes. In addition, intermediaries are looking to asset managers for ESG support in many instances. This support ranges from helping to navigate the regulatory environment to assisting with communication with end investors.
“Several asset managers have commented that their products are less salable if they do not have the appropriate level of expertise, because investors now have a higher base level of expectation around ESG,” says Deveikyte. Some 63% of asset manager respondents in the UK and 59% in Germany view ESG capability as a very important or important enabler of fund sales.
To meaningfully engage with clients, there is increasingly a requirement for salespeople to be more technically skilled around ESG and regulation. Overall, 59% of the asset managers in Europe strongly agreed or agreed that they will improve the ESG expertise of their sales teams via recruitment or training.
Nearly one-third (29%) consider improving their position as a leader in ESG a strategic priority for the next 12 to 24 months across asset classes. This includes hiring employees and upskilling existing employees.
“Firms that invest in their ESG offering and in ESG talent provide investors more confidence in their ability to engage meaningfully with companies on sustainability,” says Deveikyte.
Focus On Improving ESG Expertise
The managers that are focusing on improving their sales teams’ ESG expertise note that client sophistication, the complex regulatory environment, and the impact on various sectors and industries are requiring salespeople to be more technically skilled around ESG.
“As ESG investing continues to grow, so will the range and depth of expertise required. The ideal ESG recruit will also have a strong investment background,” notes Deveikyte.
ESG expertise is primarily related to two key areas: integrating sustainability and expertise into portfolio management and focusing on improving ESG expertise in sales teams.
In terms of ESG team structure, Cerulli’s research suggests that the typical ESG team consists of senior directors and ESG analysts. For example, the directors manage the ESG analysts and work across portfolio management and sales to bridge the gap that can exist between investors and investment teams. ESG teams typically work across sectors or themes, with ESG analysts focusing on specific sectors. Cerulli’s research suggests that when an ESG or thematic fund is launched, investors want to engage with individuals who are experts in that specific theme or strategy.
- In the US, private banks are looking to M&A to gain walletshare and enhance client servicing. Of the bank and trust company executives considering M&A options, 62% are considering buying smaller firms and 38% are considering merging with a firm of comparable size. Of the two options, the former is less cumbersome, whereas the latter is often difficult to execute effectively and can take as long as a decade to bed down.
- Asia is seeing a pick-up in new mandates—spurred in part by an expansion into relatively new areas such as sustainable investing—as investors seek external managers’ expertise. It is important for managers to monitor their investment searches, pitch strategies, and be ready for opportunities. As competition intensifies, managers will need to embrace all avenues for new business—direct, through requests for proposals, or via consultants.
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