The lull in ESG hiring that hit the asset management sector this year appears to be coming to an end. Recruitment is heating up as economic conditions improve and regulatory burdens ease.
“I’m not guaranteeing it’s a prolonged recovery but I’m pretty sure it is,” said Neil Farrell, the founder and head of sustainable investment search at Farrell Associates. “In April 2022 the invasion of Ukraine had a profound effect on my business. We felt it almost immediately. We’ve only really started to recover.”
The start of the slowdown
Early this year, recruiters told Financial News that hiring for dedicated ESG roles had slowed down after a frantic time between 2019 and 2022 when demand for sustainable funds soared and asset managers rushed to bolster headcount.
Asset managers with sustainable growth funds are among those hit worst by rising inflation and interest rates, Farrell said. Many put their hiring plans on hold.
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Growth stocks tend to be badly affected by rising rates as their value is linked to earnings potential.
In addition, a political backlash against ESG in the US and confusion over regulation in the EU deterred some firms from pushing ahead with hires.
Asset managers have spent two years grappling with the EU’s Sustainable Finance Disclosure Regulation. SFDR rules require EU-marketed funds to be designated as one of three categories: ‘dark green’ Article 9 funds, which aim for sustainability or decarbonisation; ‘light green’ Article 8 funds, which advance one or more ESG objective; and Article 6 funds, which don’t have any specific ESG-related objectives.
Managers including Amundi and BlackRock shifted billions of client assets towards the end of last year from Article 9 to Article 8 to avoid being seen as overstating their funds’ green credentials.
“What’s changed since July? Clients want to make money and continue to grow but were previously constrained by the economy, politics and regulation,” Farrell said.
“The economy is easing up in terms of inflation and interest rates. It certainly doesn’t feel like it’s getting any worse. People are starting to become a bit more positive.
“With regulation, we are definitely not in the worst of it any more. In late 2022 and early 2023, firms were trying to figure out if they were going to get sued and working out internally what they stood for and how they communicated with clients.”
Konstantina Gkropa, head of the ESG, sustainability and impact practice at Lawson Chase, the financial services search firm, said hiring activity was up. This has come on the back of “toned-down” anti-ESG rhetoric in the US and firms becoming more comfortable with regulation, she said.
Gkropa said there has been a “slightly bigger demand for ESG roles” going into the final quarter of the year. Sustainability consultants, analysts and compliance positions were among those most in demand.
“It’s nowhere near the scale of 2022 but it’s a bit better than the beginning of the year,” she said. “Hiring is definitely driven by complying more with sustainability standards.”
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According to Farrell, the increase in activity has coincided with a trend among some asset managers to opt for more junior hires.
“The HR departments and boards are not the ones leading on strategy and it takes a while for things to get signed off,” he said. “But in the meantime, heads of ESG or product are saying they need more headcount. There’s a bit of a merry-go-round at the mid-level, because people are moving up internally and are being replaced by juniors.”
Building out teams
Helen Pradas-Page, a client director at Acre Resources — a search firm that specialises in sustainability roles — said hiring momentum had picked up as budgets began to be signed off for 2024.
“We’ve been busy as a firm hiring investment professionals for impact and sustainable investment themed funds. We’re not seeing all of our business pivot to the junior end. But people are prudent,” Pradas-Page said.
A need to comply with regulatory requirements was “a huge impetus” for asset managers to hire senior ESG personnel in the recruitment rush following the pandemic, she added.
“A lot of ‘head of’ positions and other senior roles have been appointed. Now it’s about building out teams and there are a broader range of positions than there were,” Pradas-Page said.
“There are still senior appointments to be made but it’s more likely to be mid-level roles. Given the pressures of a macroeconomic slowdown and some other global trends, some clients are trying to do quite a lot with one hire.
“In Europe and Apac, it can be seen as a big commitment to make an external hire.”
To contact the author of this story with feedback or news, email David Ricketts
