Interest in Environmental, Social and Governance (ESG) investment is on the increase but the breadth of impact can be hard to grasp. According to a recent Forbes article, “ESG factors cover a wide spectrum of issues that traditionally are not part of financial analysis, yet may have financial relevance”.
This growing sector now accounts for $52bn of AUM and much of the demand is being driven by millennials of which 90% expressed a desire to direct their allocations of responsible investment in the next five years. The influence this population will have is staggering, as highlighted in the excellent Deloitte Global Millennial Survey 2019.
Let us explore further the reports’ conclusion around ‘the roadmap for business’; specifically, the people and HR implications for an ESG aware and engaged population.
Implications for Talent
In order to attract and retain top talent, companies will need their ESG focus to meet the expectations of millennials who want to work for companies which share their own ideas of ethical business and sustainability. In short, they need to provide the right company culture for this emerging generation.
And what exactly are Asset Managers doing to attract, motivate and retain talent through culture?
The answer is not very much according to Roger Urwin, global head of investment content at the Thinking Ahead Institute, “Only a small proportion of asset managers have measured and actively manage their own culture”. He goes further by pinpointing in citing Diversity and Inclusion being “a cornerstone of the asset manager culture in the future.”
From this we can conclude:
1) Millennials are drawn to purpose-driven organisations, rather than out-and-out for-profit corporations. Employers need to reappraise their purpose beyond the sole pursuit of profit if they are to attract the best talent
2) The focus on equality, diversity and inclusivity issues across the company (not just the board) will be required
3) Without these commitments retention of the best talent will be challenging
Power to the People
“Investors can play a critical role in helping companies address workforce-related issues by
seeking information on companies’ employment models and working practices”
(Investment Association 2018)
The CIPD Intangible Workforce – Investor Perspectives on Workforce Data report states the human capital information is fundamental in the investment decision process. This includes, management quality, governance, executive pay, labour related costs and employee attraction and retention.
The stark reality is that without this focus on people-related ESG priorities, the long-term prognosis looks less appealing for in the industry. Asset Managers will therefore increasingly need to set the yardstick by how others are expected (or need) to operate.
The Culture issue
The people-related issues very much align to why “Culture is often cited as a key issue in organisations that shapes the ability of the business to create value” and “investors in the environmental, social and governance sphere who look for information regarding the organisations’ approach to boardroom diversity, wider workforce diversity and gender-related information”.
Millennials and ESG priorities are intrinsically linked, the needs associated with both must be aligned to maximise the long benefits. The more an Asset Manager becomes recognised as a leader in ESG; the greater the opportunity it will have to maximise the increasing demand. These companies which are switched on to ESG will be led by individuals with ambitions in creating a culture which drives the very behaviours underpinning the essence of ESG.