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“What is beautiful about ESG is that it is a business issue and contributes to the bottom line”

Rakhi Kumar, Head of ESG investing and Asset Stewardship at State Street Global Advisors talks to Responsible Investor about how she got into ESG and her career to date.

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Can you please tell us your job title, where you work, what your job entails and what your team does?

I am the Head of ESG Investing and Asset Stewardship at State Street Global Advisors. As the Head of Stewardship, I lead a team of ESG analysts that primarily engage and vote on companies (directly or via proxies). As the Head of ESG Investment, I am responsible for the broad strategic direction of our ESG and sustainability investment platforms. We work with different investment teams and also provide education and training on ESG issues across the organisation to both portfolio managers and client facing teams. 

Can you tell us a bit more about the ESG training programme in your organisation? 

It’s formal training in a sense that we run structured training programs across the globe for investment and sales professionals on various ESG issues. These programs can be anywhere from one hour to full day sessions. Training topics can range from details about our stewardship programs and trends in ESG to our investment capabilities.  

How have you seen portfolio manager interest evolve over time? 

Interest in ESG is at an all time high across the firm. Portfolio managers are keen on hearing about the latest ESG trends and research.  More importantly they are interested in better understanding client motivation and interest related to ESG. Many of our active portfolio managers join our stewardship meetings with companies and take an active interest in considering ESG in their  investment decisions. 

What does a typical working week look like for you? What do you do on a daily basis?

A typical working week would be engaging with a company or spending time with my team to understand the insights from the engagements they've had during the week. I also spend some time with our marketing and sales teams on evaluating our ESG brand value and position. Some weeks I participate in speaking engagements at conferences and attend events where I present our ESG thought leadership and asset stewardship agenda to the wider investment community. Other weeks I spend my time reading research papers from both internal and external sources to ensure I keep up with the latest developments in ESG or developing our own thought leadership. 

Can you tell us a bit about your career path? 

I grew up in India and graduated from Mumbai University with a Bachelor’s Degree in Commerce. Right out of college I enrolled with the Institute of Chartered Accountants of India, I also worked for the internal audit and consulting firms for five years as part of my article clerkship. After qualifying as a Chartered Accountant, I moved to the US and started an MBA course at Yale University's School of Management with the aim of starting a career in strategic consulting. That's when Enron and WorldCom happened. These are the events that changed not only my life, but also financial markets because the crux of the crisis was corporate governance. It was during this period, in my second year of the MBA program, when I realised that corporate governance was very important from an investment perspective and I decided to specialise in this area. I thought that every investment house would want somebody with my accounting background, as well as somebody who understands business, investment, companies and strategy. I was so very wrong! When I graduated, it was purely a legal and compliance field. And they didn’t know what to do with me because I was not a lawyer.

For a year, I worked with a professor and did a part-time gig with a corporate governance start up to build my resumé and get some experience. Finally, I got a job with Moody’s Investors Services. Moody's as a rating agency had received some criticism after the Enron debacle and they recognised that they had missed implementing the governance aspect into their operations. My job was to educate them on governance so they could incorporate that into their thinking. 

Having worked for Moody’s for a couple of years, I moved to Washington DC to join the Institute of International Finance. There I got to review corporate governance frameworks of 12 emerging markets. I met with regulators and market participants in each country and developed market level insight on the state of the corporate governance landscape from an investor perspective.  We also made policy recommendations for regulators as to what they can do to improve the capital markets. 

My next career milestone was joining State Street Global Advisors, where I met a colleague who exposed me to the sustainability movement that was still just catching on in the investment world in 2011. Since then, I’ve been able to shape the growth and progress of our ESG team, and to build a stewardship program that is designed for impact while helping make State Street Global Advisors an ESG aware company. 

What do you like most/least about RI/ESG? 

To me, what is beautiful about ESG is that it is a business issue and contributes to the bottom line. There could be some disagreements on minor issues with analysts or portfolio managers, but what matters is that we both agree that it’s a business issue. 

One aspect that I don’t like is when people say: “I’m doing it because that’s the right way and the only way to do it” – this is when you are going to lose investor interest. We are in an industry where you need to bring people along and ensure they know why ESG matters from a business perspective, in addition to the values rationale. A good ESG analyst should understand the business case and be able to articulate it effectively. 

Another aspect that I struggle with is that some members of the investment management community don’t take time to think about the full implications of some of their proposed changes. We think we have the answer and we will push it onwards without thinking of the new challenges. Obviously, we don’t have to wait for everything, nor should we, but we should acknowledge that there are challenges that need to be understood before we act. I'll give you an example: everybody pushes the concept of electric cars being zero emissions, highlighting that they are better than gasoline cars. However, do we understand that the reason it’s called a ‘zero emissions car’ is because of the way regulation talks about emissions (as the exhaust coming out of tailpipes)? Also, how is the electricity generated – from coal fired plants or renewal sources? What if we adopt a life cycle assessment, what are the overarching emissions from a life cycle perspective? 

Sometimes I feel that in ESG we are running before we have learned to walk. 

What single thing or person has had the most positive impact on your career and why? 

It's hard to say there's one particular person. I think throughout my career that I've had many people who have inspired me. I would say my father, when I was little, had a significant influence because he would take the time to talk to us about how to think strategically. Some of my former bosses encouraged people to feel comfortable sharing views which were contrarian, which allowed  me to develop that skill. My friend and former colleague who exposed me to ESG was the best teacher of sustainability because she helped me to understand ESG from a business perspective and not just because it's the right thing to do. My current CEO Ron O’Hanley has had a great impact — as a leader, he truly understands how to manage and motivate his team and the entire organisation. 

What is your understanding of sustainable workplace culture? 

Sustainable workplace culture is where we understand the interactions between our decisions and their impact on people and society. We do not capture the impact costs of many of our decisions because we don't know how to put a financial price tag on them. However, though the impact may be non-financial, they (our decisions) also have a financial impact. 

How does your firm recruit into ESG? Is your firm looking for sustainable finance graduates or any other discipline? 

It's easier to find junior level staff because, coming out of school now, most of them already have some understanding of ESG. More importantly, they come with a passion for ESG and are actively seeking this as their career path. When I graduated from my MBA program almost 20 years ago and wanted to specialize in ESG, my classmates thought I was crazy. They hadn't even heard of the field, let alone tried to understand it or pursue it. 

We hire people from different disciplines, including those from non-financial backgrounds such as forestry and ESG policy programmes, and people fresh from business schools who have done impact work or who have a climate-related background. This helps keep our team balanced and diverse so we can learn from and challenge one another, and, more importantly, work together to create better, more impactful work with all our areas of expertise combined.

The hiring of senior-level talent is a bit more challenging primarily because finding people at that level with a financial background as well as ESG expertise tends to be harder. 

Why would you hire someone from a non-financial background? 

I believe in diversity of thought: if there are people from the same background and educational profile then we will all think the same way. We hire these individuals into our stewardship program and then focus on training them up on the business part of things. I think it’s up to us to teach them the investment side of the business. I tell my team: “You're here to educate me on what you know, and I'm here to educate you on what I know. And together, we will be a very strong team.” 

If you knew then what you know now, what would you have done differently when you started your career?

I would tell graduates now that knowledge and skills are two important parts of career development to always focus on. Throughout my career there were times when I was building skills, or other times when I had to go to school or a particular project to get the knowledge I was seeking. Thinking about it holistically helped me to improve my expertise in the area, as well as navigate me through different career choices and next moves to get to a role and work that I’m passionate about today. 

I feel very lucky because I found my interest and passion very early on right after business school. One takeaway is that I pursued jobs in the field I wanted to work in. It allowed for me to make decisions and career choices not guided by the money I was making or what my colleagues were making, but rather by what I loved doing. 

Another takeaway is taking risks. I didn’t know what path I was going to take in 2001 to get to an investment shop. I was just looking at the next thing that I wanted to do and what skills I wanted to develop, and that led me to State Street Global Advisors. 

Any qualifications that you think are helpful for career development? 

It depends on your aspirations: if you want to join an investment shop then you should be looking at the CFA or investment related qualifications. If you are more on the engagement side, then knowing how businesses operate, i.e. getting an MBA or relevant business experience, should be on your list. Though I should admit that I’ve seen some excellent analysts who come from non-business backgrounds, so it always depends. I strongly believe that if you're smart, have good work ethics, are willing to learn and work hard you are going to be successful. 

What ‘soft-skills’ are beneficial? 

Being an excellent communicator and being able to handle difficult conversations in a professional and respectful manner is a very good skillset. I also think that listening skills are quite important. 

Looking ahead, where do you see the opportunities or growth areas for career paths in RI/ESG? 

Everybody is looking to hire people with a sustainability background right now. I would recommend getting exposure to different ESG areas as you’re getting started in the industry and, as you develop your skills and knowledge, you will be able to make a more educated decision on what you want and where within the field you want to develop further. Over time, you will find that there are specialised and separate areas, for example voting, engagement, etc., that you can get more involved in. There are many ways to learn, not just on the job. One of the ways is to network with colleagues from different departments, ask them what they do, how they do it, and what skills are important, and learn from that. 

CV at a glance: 

  • State Street Global Advisors (SSGA)
    • Senior Managing Director, Global Head of ESG Investing and Asset Stewardship: 2017 – present
    • Managing Director, Head of Corporate Governance: 2014 – 2016
    • Vice President Corporate Governance: 2011 – 2013
  • Proxy Governance, Inc. / Ernst&Young, McLean, Senior Research Analyst / Assistant Director: 2010 – 2011
  • The Institute of International Finance, Policy Advisor Capital Markets and Emerging Markets Policy Department: 2005 – 2010
  • Moody’s Investors Service, Corporate Governance Division, Associate Analyst: 2003 – 2005

To access other interviews and Sustainable Finance Careers Report follow the link: esg-data.com/careers