ESG jobs are very sought after and are the talk of the town. ESG stands for environment, social and governance which are three non-financial factors with which investors are beginning to assess companies on. Essentially, the social responsibility and sustainability of companies are in prime focus.

What is ESG

Environmental: Do the company’s policies and operations contribute to protection of the environment and sustainability? Does the company have sustainable product packaging, good effluent treatment in factories, and does it keep sustainability in focus while sourcing raw materials and in operations?

Social: Does the company operate in a responsible manner towards its various stakeholders like employees, community and customers? Does the company engage in social good and contribute to the development of the society that it works out of and impacts? Does the company have fair-pay metrics?

Governance: Does the company operate in an ethical manner? Does the company engage in ethical practices and have good leadership and follow the law of the land? Is the company fair with things like executive pay, shareholder rights and audits? Does the company build trust with all its stakeholders?

A study done in 2005 named “Who Cares Wins” first coined the term ESG. ESG has become a critical term for social investors and hence to get a job in ESG, it is good to be skilled appropriately. Having an ESG certification will help boost your chances of getting into ESG.

What does an ESG analyst do?

An ESG analyst will perform due diligence before providing specific financial advice.  They will scrutinize the various non-financial parameters of any investment opportunity and provide a rounded, informed decision to a stakeholder or the company. Some of the variables that they may be looking at will include:

•     The environmental impact on a project.
•     How a company is perceived by its various stakeholders.
•     Looking at the financial reports of an organization.
•     Ensuring that the investment is sustainable.

Normally ESG analysts are employed by banks, private equity firms and wealth management companies with lucrative investment opportunities. In essence, an ESG analyst will delve into all aspects of an investment, particularly environment, social and regulatory issues, and combine these with the relevant financial data. They will then report their findings to investment specialists, senior level stakeholders and sometimes to individual clients. This will enable a more informed decision to be made before any investment opportunity is considered.

Duties of an ESG analyst

A major part of the time of an ESG analyst is spent in looking at data related to a possible financial venture. Apart from looking at all possible angles that have been outlined above, they will look at findings such as:

•     Past audits.
•     Big data available both in public and in private sources.
•     Public policy statements.
•     Share prices and analysis from well-known and reliable websites.
•     Short-term and long-term growth projections.

They have to determine if the risk margins associated with a certain venture are in line with the ESG guidelines set out by the company. The analyst will have to use the findings to understand what steps can be taken to mitigate any risks that may be present.

Skills that an ESG analyst will require

An ESG analyst will be required to have good team-working capability and be able to build a strong network with their colleagues. These skills will be useful to build a balanced analysis of an investment that includes ESG factors and others such as risk and opportunity from a financial viewpoint.

They have to provide timely reports for new opportunities and monitor past investments from an ESG perspective. An ESG analyst will also have to review existing investments and ensure that they are compatible with the changing ESG strategies of the client.

Therefore, one of the key skills required for an ESG analyst is to be able to work in a fluid environment and multitask very effectively. They have to accept new challenges and be able to work under pressure. They have to explain complicated issues in a concise manner.  

Some additional skills that will be very useful for an ESG analyst will include:

•     Collaborating with investment teams.
•     Good and effective communication skills.
•     Knowledge of regulations and guidelines.
•     Being fully transparent with findings.
•     Good quantitative skills.
•     Good understanding of asset management and financial markets.
•     Ethical approach.

There are various certifications and qualifications available to become an ESG analyst. It is highly recommended that you undertake these programs to build your career in ESG.

Conclusion

An ESG professional must view investment opportunities from a sustainable, moral and transparent perspective. They have to look at policies and strategies of an organization including those that do not relate to financial perspective. An ESG career has its own challenges. Many critics do not appreciate the value of this position since it is rather new in the investment community. An ESG analyst will need to be impartial when comparing financial returns with compliance, governance and environmental issues.