1. Overview of this Career Area (“Why”)
Sustainable Finance
Sustainable finance refers to the process of taking environmental, social and governance ESG considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities
and projects. Green banking—or banking pegged to the environmental aspect of ESG issues might just be the hottest topic of today. Impact investing is a strategy that seeks to create a specific positive impact or outcome. What sets it apart from pure philanthropy (like cash donations) is that impact investing includes an expectation of financial returns that are (at least) comparable to market returns.
With as many as 450 financial institutions, banks, insurers and asset managers committing to invest $130 trillion of private money to help the world become a net-zero carbon emitter by 2050, ESG job opportunities in the sector will abound for years to come. That $130 equals approximately 40% of all assets under management, globally.
From now on, financial services firms will have to issue more green bonds, publish mandatory sustainability disclosures, carry out proper climate risk surveillance, increase their global ESG reporting standards, and improve the consistency of data in fields such as climate change.
SF roles & jobs
Sustainable finance roles/jobs in finance that are being created:
Sustainable Finance Investment Banker and Green bonds specialists.
The green bond market reached record levels in 2023, bringing the total cumulative labelled issuance to $2.3 trillion.
ESG Coverage Bankers.
Investment banking coverage bankers, in charge of client relationships, will also have to step up their game and ESG knowledge to help pass on the message to clients.
ESG Portfolio Manager (PM)—Integration
Asset management firms are hiring ESG-specialist PMs to help governments and corporations undertake their net-zero transitions.
ESG Product Specialist.
Transitioning to their own sustainability targets will require a lot of explanation to clients, a role that ESG Product Strategists or Specialists will carry out.
Chief ESG Officer.
Consultancy and accountancy firms, charities and trade finance bodies will need leaders to champion their ESG efforts.
Head of ESG Data Services.
As an employee or as a consultant, climate change and other sustainability factors will require accurate data in order to value investment projects and assess their risk.
ESG Analyst.
The “analyst” job may include an entry-level research assistant role or a PhD-educated specialist in deforestation. NGOs and governments are also potential employers.
Impact investing
Impact Investing is not the same as ESG, although there are certainly some common themes. Impact investing often focuses on improving environmental or social outcomes, which is part of peoples’ confusion. But impact investing is not ESG.
ESG is an analysis framework that helps stakeholders understand and manage risks and opportunities within an organization (or a portfolio). And while this framework is often applied to investment decisions and/or analysis (called ESG investing), it’s not the same as deploying funds with the express intention of generating a positive externality or impact beyond the four walls of the organization itself.
To qualify as impact investing, there must be a return expectation that is in line with or greater than that of the market. Of course, expected returns do not necessarily lead to actual returns.
Impact investing can mean many different things and can be characterized in a variety of ways. But for a capital allocation decision to qualify as impact investing, two important hurdles must be cleared:
- A positive impact is clearly articulated and outlined; and,
- A financial return expectation (at least comparable to the market) must
be intended.