ESG, which, according to the Corporate Finance Institute, stands for environmental, social and governance, is a set of standards used to evaluate companies and investments based on their impact in those areas. The purpose of ESG is to incentivize responsible behavior by companies and give investors a way to invest their money without contributing to environmental degradation, social injustice, corruption and other issues.
Stakeholders and consumers increasingly look for companies to adhere to ESG standards, which cover everything from climate change to DEI to corruption. As ESG investing grows in popularity, more and more career seekers have begun to show interest in ESG jobs.
When boards and stakeholders prioritize ESG, they often rely on third-party organizations to assess their efforts. No universal standard for ESG exists, so companies must trust the third-party organizations that vet them. Each ESG rating agency has its own scoring system and set of standards and models to calculate a company’s ESG score. ESG scores measure a company’s performance on ESG compliance and the potential risks of noncompliance.
For example, agencies calculate a company’s environmental score based on things like their treatment of animals and their greenhouse gas emissions. A company’s social score is based on its treatment of its employees, though some agencies also look at charitable donations and community impact. Governance scoring is based on board operations and legal and regulatory issues. This means not only ensuring that a company adheres to all municipal, state and federal laws, but also gauging whether the board consists of people from diverse backgrounds and whether non-executives are compensated fairly compared to executives.
The largest providers of ESG ratings include MSCI Inc., Bloomberg ESG Data Services, Corporate Knights Global, Sustain Analytics ESG Risk Ratings, Dow Jones Sustainability Index, Thomson Reuters and RepRisk.
Each organization has its own way of calculating the ESG score. Some agencies rely on companies to provide data for their scores, while others use information that is publicly available. Corporate Knights uses only publicly available information.
RepRisk also uses public sources, screening over 100,000 of them daily, including international and local print media, online media, newsletters, NGOs, governmental bodies, think tanks, blogs and Twitter. They identify ESG risks based on international standards and norms, including the ten principles of the United Nations Global Compact (UNCG) and the Sustainability Accounting Standards Board (SASB).
Only some ESG ratings are publicly available. Dow Jones creates indices on top companies on a yearly basis. For RepRisk and Bloomberg and others, however, reports are available solely to companies who want to manage their risk and investors who want to gauge a company’s ESG score before investing. Research shows that companies with high ESG scores are lower-risk investments with a high degree of resilience.
Those who care about responsible investment, sustainability and/or social justice in the corporate world may be interested in pursuing a career in the growing ESG field. There are many ESG jobs available at third-party ESG assessment organizations, which vary from departments of large companies to smaller, boutique firms. Below, we will go over some ESG career opportunities.
You may have heard of ESG investing jobs or ESG consulting jobs. Usually, these jobs require specialist knowledge and advanced degrees. ESG jobs require strong communication skills across the board.
You may be interested in working in an ESG role in a banking or finance environment. This typically requires a background in relevant finance experience, including a degree in accounting, economics, commerce or banking.
ESG analysts ultimately provide companies with financial advice. ESG analysts perform due diligence by scrutinizing non-financial aspects of an investment opportunity, such as a project’s environmental impact or public opinion about the company. ESG analysts are employed by private equity firms, wealth management organizations, banks and similar financial institutions; therefore, the job can be quite lucrative.
An ESG analyst position requires a degree in sustainability or environmental science. An analyst role requires proficiency in project management as well as people skills, because this job requires you to talk to people in all areas of business. An analyst position also requires, of course, strong research and analytical skills, with attention to detail and an understanding of sustainability indices. A Senior analyst will have 2-3 years of experience in ESG. In addition to exposure to ESG frameworks, this experience will allow them to hone their people skills interacting with stakeholders, executives and board members.
ESG consultants work with businesses to provide clarity and insights into their ESG-related issues. ESG consulting jobs cover a wide range of areas of expertise, from government to mining. These jobs require industry experience and knowledge.
A job as an ESG consultant starts with a degree in Environmental and Social Governance, Sustainability, Finance, Law, Economics or a related field. Hiring managers also look for industry experience and knowledge, with a track record of ESG and Sustainability consulting, along with business acumen and project management skills.
Engineering roles are one of the most exciting areas of ESG jobs. Engineers analyze problems and design solutions to problems like a company’s excessive energy use. An ESG engineer typically will need to have exposure to risk and compliance management, as well as proficiency with Excel and PowerBI. Experience with ESG software is a plus. Some ESG organizations may also want you to have experience in mining and resource industry projects, or in reporting on sustainability.
An ESG researcher position is typically suited for people with 5+ years of related experience. A career in ESG research starts with a degree in something mathematical, such as commerce or finance. Some organizations require post-graduate degrees such as a Masters in Finance or Economics, an MBA or a CFA. Some ESG researchers start out with a degree in law, social sciences or business.
No matter the educational background, an ESG researcher will need to have the ability to review and analyze large amounts of data. If you know you want to pursue a career in ESG research, you might consider earning a more specified degree, such as a Masters in Environmental Management, an MBA in Sustainability or a Masters in Sustainability.
ESG investing is a relatively new and growing field wherein the number of jobs will likely rise. However, political pushback against ESG has already begun. Some states either have legislation or are pushing legislation in place to restrict state or local entities from choosing investments based on ESG. This is significant because it covers many big investors such as public universities and public employee pension funds.
These anti-ESG bills are put in place by states who do not want companies to prioritize policy and social objectives over financial objectives, often citing the impact ESG investing could have on their local economies. Currently, Texas, West Virginia, North Dakota, Oklahoma, Kentucky, Utah, Minnesota, Idaho, South Carolina, Louisiana, Wyoming, Arizona, Indiana, Missouri, Ohio and South Dakota have laws on the books requiring state entities to either divest from companies that engage in ESG investing or refusing to contract with companies that do so. In July 2022, Florida Governor Rick DeSantis proposed an anti-ESG bill that would be ratified in 2023 to prevent social investment.
Another concern with ESG investing is the lack of consistency in assessing companies and a lack of centralized data that reflects the overall supply chain. Investment managers are accused of “greenwashing,” or deceptively marketing their investment products as environmentally friendly.
In Europe, there is a regulatory body called the Sustainable Finance Disclosure Regulation that puts in place guidelines for ESG investment products. In the United States, the SEC has proposed amendments to rules and reporting forms to promote consistency and reliability in ESG ratings; however, this proposal has yet to be adopted. This proposal would change the rules regarding the disclosures required for mutual funds and the requirements for mutual funds to adopt names suggesting an ESG focus.
If your main motivation is promoting social and/or environmental justice, there are other careers that serve these goals more directly. ESG is realistically more of a harm reduction approach. However, it is also a more lucrative career. Remember that ESG is ultimately just a label. By working in the field, you can help define what the label means, and you can potentially make a difference.