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In this edition of the Insights Series, we look at the key themes in ESG reporting and the main responsibilities of those specialist functions across investment management, banking and insurance and private markets.
With ESG reporting absorbing a significant amount of capacity, and obligations under new and existing regulations such as SFDR, TCFD, TNFD and ISSB, increasing stakeholder expectations and pressure from investors, the demand for enhanced ESG reporting remains high.
So too does the need for reporting professionals with a good understanding of the evolving regulatory and ESG reporting landscape in financial services. For publicly listed companies, the sustainability ratings strategy and management of the engagement with external Sustainability rating agencies often falls to the sustainability reporting lead.
So, what do we mean when we refer to “ESG reporting” in the context of financial services?
At a corporate level, this is the disclosure of an organisation’s environmental, social and governance performance and practices. It provides transparent information about how an organisation addresses various sustainability and ethical considerations in its operations, policies, and decision-making processes.
For investors, ESG reporting also provides non-financial data to help inform valuations, company engagements and portfolio management. ESG reporting functions support investors with data gathering, analysis, and disclosure, as well as the incorporation of steadily growing set of sustainability metrics
In banks & insurers, ESG reporting work covers the coordination and integration of company wide ESG metrics as well as the external disclosures of this data and oversight of greenwashing risk.
The talent landscape
The structure of ESG and scope of reporting teams in any financial services organization largely depend on the size and complexity of the business and the regulatory framework it operates in:
Investment management: ESG reporting is often continually being integrated into financial reporting process with one or two people coordinating activities, providing guidance and specialist expertise from a central sustainable investing team. Those in the central teams will often have a role where reporting is just one component with other integration focused tasks involving data, tools and frameworks often included.
Private markets: As ESG teams tend to be leaner, reporting requirements less onerous and access to consistent data more challenging, ESG reporting is often undertaken by analysts working with portfolio operations teams at an asset class level. Some of the larger GPs may opt for a senior specialist, sitting centrally, whose main purpose is to oversee ESG reporting for the business. Many GP’s who do not have the scale to justify a large inhouse team rely on an ever increasing pool of professional services firms and individual consultants who offer outsources ESG reporting solutions
Banking: ESG reporting capability in banks is significantly greater than in their financial services peers due to scale of operations and the regulatory burden placed on the industry. Banks will often have dedicated senior resource in the role of Head of Sustainability Reporting or Head of Sustainability disclosures, supported by specialist reporting teams looking at specific frameworks like TCFD, TNFD, CDP and GHG Protocol.
Insurance: In the last 12 months, we have begun to see ESG reporting move from centralised sustainability teams to the finance function in some insurers. There is still a dotted line into the group sustainability team to provide thematic expertise. This shift reflects the overlap between ESG issues and areas of finance such as accounting IR and tax. It mirrors what is already happening in other sectors, where companies are setting up a designated role within the finance function to work closely with sustainability, legal and communications teams to prepare for ESG disclosure mandates.
Interim talent focus: Acre is seeing a surge in demand for flexible, non-permanent resources in response to the escalating requirements on ESG reporting. Freelancers specialising in ESG reporting and disclosure are entering the market with targeted skill sets, addressing projects like SFDR, implementation, evaluating businesses' preparedness for incoming regulation such as TNFD, and supplementing reporting teams facing short term capacity challenges. This trend reflects a dynamic shift towards agile and specialised workforce solutions to navigate the evolving landscape of ESG reporting.
Talent pool analysis
Despite the significant ESG reporting burden across financial services, there is still a lack of senior-level talent focused purely on this area. Most reporting specialists tend to broaden out from “doing” reporting into more of an oversight or strategic role as they progress – keen to get “get out of the weeds”. Consequently, the talent pool at a senior manager/VP or head of level is small. Clients frequently recruit from consultancies (with backgrounds in audit and/or accountancy) or corporates for their head of reporting roles, where they exist.
For many smaller firms there may still be insufficient demand for a full-time senior reporting lead. For example, in smaller private markets funds, the requirement may be for a broader role combining senior ESG reporting expertise with commercial acumen/value creation. Finding the right combination of skills can be problematic; someone with deep technical regulatory understanding with an interest in reporting does not always possess the requisite commercial acumen and client-facing experience to fulfil a broader remit.
Looking ahead, if the integration of sustainability and financial reporting becomes more common, there may be the emergence of a more mainstream talent pool, including a Head of Reporting role, that combines financial and non-financial reporting.
Key responsibilities in reporting roles across financial services
Data Collection and Analysis: Gathering relevant ESG data from various sources, such as company reports, databases, and third-party providers. Analyzing this data to assess the environmental, social, and governance performance of companies, assets or financial products.
Reporting and Disclosure: Compiling accurate and comprehensive ESG reports that provide transparency on the ESG practices and performance of the assets under management or financial products. Ensuring compliance with relevant reporting frameworks, standards, and regulations.
Integration of ESG Factors: Collaborating with investment teams and risk management to integrate ESG factors into investment decision-making processes. Providing insights and recommendations on how ESG considerations can be incorporated into investment strategies, product development and risk assessments.
Stakeholder Engagement: Engaging with internal and external stakeholders, such as clients, regulators, and industry organizations, to communicate ESG initiatives, performance, and progress. Addressing inquiries and providing information related to ESG reporting.
Monitoring and Evaluation: Continuously monitoring and evaluating the effectiveness of ESG strategies and initiatives. Identifying areas for improvement and implementing appropriate measures to enhance ESG performance.
Policy Development & Implementation: Continuously monitoring and evaluating the effectiveness of ESG strategies and initiatives within financial services.
Training & Development: internal training on ESG concepts, reporting requirements and best practices
We hope you have found this a useful snapshot of the market. If you would like to discuss the key trends in the talent market or your hiring requirements across sustainable finance in more detail then please email ian.povey-hall@acre.com to set up a call.
