Professionals are fleeing ESG roles. It might have something to do with the pay.
A compensation survey from recruitment company Pearse Partners found that ESG professionals working in finance are pretty under-compensated compared to their colleagues in old-school finance.
The best paid ESG professionals are impact investors, who invest in companies with both financial and ESG-related goals (such as IRR and GHG targets). After 9-12 years in the ESG space Pearse says they make £150k ($189k) in salary per year, which is vaguely similar to what Pearse Partners says VPs are paid in corporate finance and advisory jobs atinvestment banks in London(unless they have the good fortune to be somewhere like Deutsche Bank). However, whenbonusesare factored in, bankers are paid around 10% more than even the highest paid people in ESG.
Pearse's categories are confusing. It says senior asset managers, consultants, NGO workers, and even private equity staff specializing in ESG are paid even less. Investment managers are close to impact investors (Pearse says they're on £260k), but it's not entirely clear how they're differentiated from them (or asset managers) working for asset management firms.
The overall message of the survey is, though, that pay is lower if you want to save the world. This is especially the case if you work in private equity.The range of salary and bonus compensation at large private equity funds (over €1bn) in Europe for a mid-career professional (specifically, a principal) is between €331k ($363k) and €526k ($576k) according to Heidrick & Struggles. Pearse puts comparable ESG pay at around £156k ($196k).
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FAQs
Challenges in data quality and standardisation
A primary challenge in ESG reporting is the acquisition and verification of high-quality data. Financial institutions often struggle with extracting relevant data to measure performance on ESG metrics from investments.
Does ESG pay well? ›
The average ESG salary ranges from approximately ₹3,00,552 per year (estimate) for an Analyst to ₹15,09,930 per year (estimate) for a Senior Manager.
Is ESG actually effective? ›
Those analyses found positive correlations between ESG performance and operational efficiencies, stock performance and lower cost of capital.
How does ESG impact finance? ›
By having an ESG strategy, and sharing that strategy, businesses can show their efforts to mitigate risks and how they can generate long-term financial returns that relate to both the business and the community. Stock and public image increase favorably, raising the company's value.
Why is ESG flawed? ›
'The ratings and indices used by investors to identify ESG stocks are not designed to measure a company's positive impact on the Earth and society. Instead, they assess the potential impact the world has on a company's value and its shareholders. '
Why is ESG underperforming? ›
Missing out on returns from the so-called "Magnificent Seven" tech stocks was one of the biggest reasons for underperformance. Meta, Alphabet, Tesla and Amazon were all excluded from certain ESG indexes due to ESG controversies or because they had a high ESG risk relative to others in their sector.
What is the highest paid job at ESG? ›
What is the highest salary at ESG? The highest-paying job at ESG is a Director Ejecutivo with a salary of £176,328 per year (estimate). The lowest-paying job at ESG is a CSA - Customer Service Associate with a salary of £9,938 per year (estimate). Are ESG employees satisfied with their compensation?
Is a career in ESG lucrative? ›
ESG analysts are employed by private equity firms, wealth management organizations, banks and similar financial institutions; therefore, the job can be quite lucrative.
Are ESG funds performing well? ›
ESG Fund Returns Recover, but Still Trail Conventional Peers by a Small Margin. The tech stocks that helped ESG funds and the utilities that hurt them in 2023. Sustainable funds performed much better in 2023 compared with 2022, but results were mixed across asset classes.
What are the downsides of ESG? ›
However, there are also some cons to ESG investing. First, ESG funds may carry higher-than-average expense ratios. This is because ESG investing requires more research and due diligence, which can be costly. Second, ESG investing can be subjective.
Now the term is falling out of favor. S&P 500 companies citing “ESG” on earnings calls last quarter reached their lowest number since the same quarter in 2020, according to FactSet data. Dedicated ESG funds have also lost popularity with investors.
What are the complaints of ESG? ›
Many issues come under the ESG umbrella, including complaints concerning the organisation's environmental impact, allegations of misreporting or conveying a false impression of environmental and sustainability credentials (greenwashing), tax evasion and corruption, human rights abuses in the supply chain and bullying, ...
What are the risks of ESG in finance? ›
When occurring, ESG risks will have or may have negative impacts on assets, the financial and earnings situation, or the reputation of a bank. ESG risks include environmental risk, social risk and governance risk and the resulting impact on banks' P&L and liquidity.
What is the role of ESG in finance? ›
Environmental, social, and governance (ESG) investing is used to screen investments based on corporate policies and to encourage companies to act responsibly. Many brokerage firms offer investment products that employ ESG principles.
How do investors feel about ESG? ›
Investors increasingly believe companies that perform well on ESG are less risky, better positioned for the long term and better prepared for uncertainty.
What are the financial risks of ESG? ›
Taking a holistic approach to ESG risks within risk management can deliver clear and tangible outcomes that move financial institutions toward a more effective, efficient and sustainable CRO function. Opportunities for growth within the Risk function. Opportunities for growth within the Risk function.
What are the difficulties with ESG? ›
Typical challenges include:
- Limited (or absent) data governance: Robust data governance is crucial for maintaining data integrity. ...
- No single source of truth: The absence of a centralized system of record (SOR) hinders efficient data collection, management, and auditing within organizations.
Critics of ESG — such as a group of Republican states that banned Blackrock and other “ESG friendly” asset managers from their state pension plans — argue that considering environmental and social factors violates the fiduciary duty that asset managers have towards their clients.
