Ben Burling, Managing Director at Logan Sinclair examines the impact on recruitment policies for the next generation of asset management recruits as the issues surrounding ESG become ever more important to the landscape.
The old order is changing as a new breed of investment professionals enter the industry for the first time. According to recruitment agency Logan Sinclair, over 31% of candidates aged between 25 and 28 see ESG /SRI as a critical component in their career choice. And a whopping 80% of 22 to 24-year-olds say that ESG/SRI is their preference.
Candidates in their mid-twenties to early thirties increasingly want not only a decent salary but a sense of purpose in their daily life. Environmental issues such as climate change and pollution, Social issues such as working conditions and diversity, and Governance issues such as executive pay and political donations all appear uppermost in their minds.
No Surprises
This should come as no surprise to the asset management industry. Colin Melvin, the founder of Arkadiko Partners, an SRI specialist, and a former Chief Executive of Hermes EOS, observes that asset managers are already under increasing pressure from their staff and clients to do more on sustainable investing. “Asset managers are interdependent with their clients and the companies that they invest in and they also share a purpose - a common interest in a flourishing economy, society and environment,” he observes.
Melvin believes that the traditional way in which we value assets for investment (encapsulated in Modern Portfolio Theory) ignores the effect of investment activity on the system that sustains it. “The movement towards a more sustainable and responsible investment represents a realisation that we can no longer afford to suffer the negative systemic impact of the pursuit of short-term financial return,” he says.
Naïm Abou-Jaoudé, CEO of Candriam, expands on some of Melvin’s comments. “Capital is not growing in the right direction. It needs to be more inclusive. If not, this will be costly in future in all manner of ways - economically, socially and so on” he observes.
At Candriam, Abou-Jaoudé explains, the company focuses on soft skills and emotional skills to ensure that teams work collectively together. The company seeks to build long-term relationships with its clients. “Collective success for all ensures that their motivations are in alignment,” he says. While ESG is hugely important, so too is social inclusion, he adds. And companies need to practice what they preach.
A Question of Integrity
Tarne Bevan, at Glacial Integrity, takes a keen interest in sustainability and diversity issues and has been following the latest developments in the industry closely. “Firms looking to acquire new, purpose-driven talent will need to demonstrate their transparency and integrity, particularly where they’ve adopted ESG integration or are promoting more sustainable investment propositions,” she observes.
More generally, she continues, younger generations are more connected than ever through social media and have no hesitation in calling out companies or products that fail to deliver on their promises. This creates not only a talent acquisition and retention challenge; it may also lead to reputational risk for firms that underestimate the ‘voice’ younger people have on the future of demand and employment.
Bevan also believes that greater diversity - gender, cultural, social and intellectual - is critical in building a sustainable investment industry that has new insights and a different approach to risk assessment. If investment firms are truly serious about delivering sustainable investments, she adds, they need to have the right people for the job.
Tom Peters, a recent addition to Logan Sinclair from J.P. Morgan Asset Management, observes that this is a very complicated part of the market when it comes to structuring new products, as there is no standardisation. “Each house has a slightly different approach to ESG integration and exclusions,” he says, “and MSCI has a team of 300 people specifically trying to solve this, largely to standardise indices to give asset managers a chance to create portfolios using the same investment universe and create a level playing field.”
If there isn’t a level playing field, Peters warns, managers may do the bare minimum to position themselves as responsible investors, but this will not align with the views of the new generation of recruits into the industry. Companies need to recognise that their new customers are also their new employees - and both want to see real change rather than empty promises.
International phenomenon
Elsewhere, Michelle Auger, whose work over the last 6 years has included work on long-term, structural investment themes, particularly those relating to ESG issues, points out that the next generation of asset management recruits’ quest for a greater sense of purpose isn’t just confined to the UK. Today, she reflects, it’s an international phenomenon.
For example, students at France’s elite universities - ‘the grandes ecoles’ - launched a ‘manifesto’ last year entitled Wake up call on the environment - a student Manifesto. This committed the students to do more to avert climate change. Their approach was simple but effective - new graduates would simply refuse to work for employers who didn’t care about the environment.
“Idealistic perhaps,” observes Auger, “but very potent.” Indeed, does any employer want to risk losing the war for talent, particularly the best brains in the country? “If they haven’t already done so,” adds Augur. “Asset managers need to master Responsible Investments very quickly in order to survive in the long term”.
Striking a balance
Of course, it’s not going to be all plain sailing. For asset managers seeking new recruits, it’s sometimes difficult to strike a balance between ESG/SRI experience and their commercial decision making. “But on the plus side”, observes Melvin, “the adoption of sustainable investment offers asset managers the opportunity to strengthen their client relationships and enrich their investment processes”.
Alex Kennedy, a recent law-graduate and search consultant at Logan Sinclair, comments: “Let’s not forget that recruitment consultants are also playing a major part in this brave new world. Not only do they have access to some of the largest asset management firms in the world - they can also source the brightest, most qualified graduates.” But perhaps most importantly of all, the next generation of asset management recruitment consultants now constitute a major part of the recruitment agencies. They share the same concerns and preoccupations as the people they are seeking to place. “
Perhaps here, more than anywhere, next gens can find common ground and help find that sense of purpose.
Interested in learning more about the CFA UK Certificate in ESG Investing? Find out more here.
This article was written by Ben Burling, Managing Director at Logan Sinclair. If you too would like to join the conversation and share your views on the development of ESG investing and its impact on our industry, please contact marketing@cfauk.org to enquire about editorial opportunities.