In recent years, the asset management industry has seen an explosion of sustainability roles and demand for ESG talent – and a notable characteristic of this recruitment drive has been the number of women hired, including in leadership positions.
This reflects a broader trend. In 2021, 70 percent of newly appointed ESG senior leaders across all companies were women, according to data from global leadership advisory firm Russell Reynolds Associates.
However, as the sustainability industry has expanded and women have climbed the ranks into more senior ESG positions in asset managers, this trend has not been matched in other parts of businesses. In key areas, gender diversity remains stubbornly low.
Ian Povey-Hall, global head of sustainable finance and impact investing at recruitment consultancy Acre, says asset managers are seeing the new roles driven by sustainability as an opportunity to bring in more diversity. “But the challenge is really around the investment desks and in key strategic roles rather than solely more operational teams.”
Last year, research from The Kronor Group found that 49.6 percent of ESG specialists hired by hedge funds globally in 2020 and 2021 were women. For total hedge fund hires, the figure was just 28.6 percent.
“From an investment perspective, there’s definitely an issue with lack of diversity,” says Neil Farrell, founder of recruiter Farrell Associates. “Pretty much every client I speak to has raised this.”
ESG recruiters say that, despite constantly flagging lack of diversity as a concern, firms are not putting in the time or effort required to address the issue.
“Companies are encouraging more diverse hires for overall optics, but there is no long-term defined strategy,” says Neil Farrell, founder of Farrell Associates. Indeed, he adds, many asset managers are still in the “tick-box phase” for diverse hiring.
Recruiters say that, while companies are trying to increase their diversity efforts, there are still very few that have solutions or initiatives in place to actively improve the situation.
This is partly due to the additional effort involved, says Povey-Hall. “When working on investment roles in financial services, up to 90 percent of the candidate universe can be male for a particular search – so that is more challenging across the board when looking to create more diverse investment teams.”
Farrell agrees. “We continually try to consult with firms when they’re hiring and ask how flexible they’re prepared to be on their diverse talent requirements. We’ve struggled to get a broader mandate to do that because companies don’t have the time to wait for candidates or to train them.”
“Generic” and unclear strategies were flagged last month in a report by the Financial Conduct Authority (FCA) on diversity and inclusion, which criticised financial institutions for having policies which lacked clear purpose.
Venetia Bell, group chief sustainability officer at GIB Asset Management, says companies need to better focus their DE&I strategies if they want to see significant improvements.
“Companies will often move the diversity discussion on from women, to BAME, to socioeconomic diversity, to cognitive diversity – and so you find a dilution of attention or a widening of scope around diversity, depending on how you look at it.”
Povey-Hall says firms need to work on the lower ranks of their recruitment to see significant progress and create a pipeline of diverse talent.
“Over the last two years, there’s been a shift from policy and advocacy to implementation and execution,” he says. “But there’s still a very long way to go. Asset managers need to bring people in at a junior level from more diverse backgrounds so that they can be allowed to progress into investment roles. The growth of sustainable and impact investing products is a great opportunity to do that.”
Barrier or opportunity?
As to why there are so many more women than men in the ESG space, Bell suggests this could be attributed to “lack of expectations and a clean slate”.
“Women may have been attracted to ESG roles because, as a relatively new area, you have the ability to shape it,” she says. “You don’t have lots of preconceptions about how things should be done, or a very firm remit, as you often find in other parts of financial services.
“Sustainability roles can be a great way to build something that matters,and a unique opportunity to define what sustainability means for the organisation. The role that I have as chief sustainability officer didn’t previously exist, so I’ve had the opportunity to build this from scratch.”
Last year, Hortense Bioy, Morningstar’s global director of sustainability research, described ESG as a “tremendous career opportunity for women”.
She noted that, while ESG was a secondary priority for asset managers a few years ago, it has now become central to the investment world, creating space for women who had previously been in the background “to sit at the top table and take part in strategic decisions”.
Shami Nissan, head of sustainability at Actis, notes how valuable this has become to firms that have made ESG commitments to their clients. “Giving a sustainability professional a seat at the top table is crucial if you want to integrate sustainability into the business strategy.”
A 30% target
Financial services gender non-profit 100 Women in Finance is targeting 30 percent women in senior investment roles by 2040. Its CEO Amanda Pullinger also believes that ESG provides women with a way into the investment sphere.
“From an investing perspective, I think ESG is one of the best things that’s come along because it’s a hook into the industry,” she says. “What’s encouraging about ESG is that women who perhaps would not have gone into mainstream investing go into the industry because they feel like they can make a difference in that space.”
She added that sustainability roles have opened the door for women and provided them with more visibility in the financial world.
“There’s a lot of discussion about how we can increase the number of women in senior investment roles, since the numbers are often particularly poor and stubborn in that sector. But I think the main issue is not a lack of available talent, but rather a lack of visibility for these women.
“Visibility is critical because we’ve got to change people’s perception of what an investment professional looks like.”
Diana Retana, ESG and impact investing recruiter at Lawson Chase, says this is starting to filter through to the investment side of the industry as sustainability moves into the mainstream.
“We’ve seen that the majority of ESG leaders are female, with women more likely to choose a role with a positive impact in a sector traditionally led by men,” she says. “Female ESG professionals are being hired and trained to transition into investment roles, as these firms ultimately value their knowledge to improve their sustainability strategy.”