Why ESG and sustainability knowledge are your ticket to thriving in finance

For finance professionals, having ESG and sustainability expertise isn’t just about keeping up
with industry trends, it can also help boost your career. We explain how...

Having a solid understanding of ESG (Environmental, Social, Governance) and sustainability is more important than ever in finance. Today, knowledge of ESG principles and considerations isn’t just a nice-to-have – it’s a necessity for ambitious finance professionals.

In this article, we explain why ESG and sustainability matters and why mastering it should be a top priority if you’re serious about advancing your career.

What is ESG investing?

Before going further, it’s worth noting that there are several definitions of ESG investing. Some focus on ethical or moral principles, others on environmental and social factors.

But broadly speaking, ESG and sustainability investing is when you incorporate environmental, social, and governance factors into your investment decision-making approach with the aim of generating financial returns.

And it's a fast-growing space. ESG assets are set to exceed USD53 trillion by 2025, according to Bloomberg.

“The investment industry is playing an important role in tackling some of the world's biggest environmental and social challenges,” said Wanfeng Zhou, CFA, an ESG and Climate Consultant in Toronto.

Why it’s important

ESG investing took off in the early 2000s and has remained a familiar part of the investment landscape since. That doesn’t look set to change any time soon.

It’s become more than a passing trend for two main reasons:

• Investors demand it: they recognize the importance of ESG factors on companies’ sustainability and profitability. Plus, as many investors have become more socially conscious, they’re looking for opportunities that align with their values.
• Regulators support it: they see it as a way of encouraging companies to behave responsibly and keep markets stable. They also believe that incorporating ESG principles into business practices promotes transparency and ethical behavior.

Career growth

With ESG investing becoming increasingly important in today’s landscape, it makes sense for finance professionals to understand ESG principles and how ESG investing works.

However, it goes further than simply keeping up and staying relevant. It can unlock career paths and help them grow professionally.

Job opportunities

As companies prioritize sustainability, there’s a growing need for finance professionals with ESG knowledge.

“The ESG and the sustainability field has evolved a lot over the years. There is a strong demand for professionals who can do ESG or sustainability analysis,” said Tim Chan, CFA, Head of Sustainability Research, APAC (ex-Japan) at Morgan Stanley.

A 2023 report found 68% of finance teams cited ESG data collection and reporting as the most in-demand skill.

However, there appears to be a shortage of people with ESG and sustainability skills. Some 68% of financial services professionals polled in a Canadian survey said there was a shortage of talent with sustainable finance skills coming through.

This is despite analysis showing US-based finance professionals whose job titles include ‘ESG’ or ‘sustainability’ earning on average around 20% higher base salaries than colleagues of the same seniority without those labels and those in Hong Kong commanding a 30% premium.

Promotion

In a similar vein, understanding ESG and sustainability principles can help accelerate career progression. As organizations respond to growing client demand for advisors and finance professionals with ESG expertise, they look to retain and promote skilled talent.

Bosses value those skilled in ESG for their ability to drive innovation, gain competitive advantages, and stand out in the market.

Francois Crémet, CFA, a Senior Director in the Sustainable Investment team at investment group CDPQ, says “having a sustainability background is a great way to have a successful career and also have a positive impact in the economy”.

"I am convinced that the integration of ESG considerations in the investment decision-making process is a trend and a trend that is here to stay,” he said.

Professional reputation

Having ESG expertise not only sets you apart within your organization but also across your industry. Having a defined skill set enables you to join groups, network with like-minded professionals and cultivate relationships with people in the same field. There are various conferences and events for ESG leaders and experts held throughout the year.

This can help position you, expand your influence and can open doors to new career opportunities.

Future proofing

ESG knowledge is an important string to your bow when it comes to future proofing your career. As more companies embrace sustainability and ethical practices, understanding ESG gives you an edge and helps you stay relevant and valuable in a fast-paced, competitive market.

And getting on board early counts. After all, as Tim Chan points out: “Many markets are still trying to or starting their journey on ESG.”