Sustainability requirements for the financial sector are steadily growing. Demand from clients and investors has been increasing in recent years. It turns out that investors are actually willing to live with lower returns when it comes to sustainable investments.
In 2021, the Danish sector’s green financing reached 548 million DKK, while we are also seeing more green financing and investment products. There is no doubt that sustainability has made its way into the financial sector – and we have probably only seen the tip of the iceberg.
Ongoing development makes it challenging
The challenge, however, is that demand has accelerated to such an extent that it is placing enormous demands on the sector to keep up. The plane is being built while flying it. We also see this when it comes to recruitment, where there currently is a growing demand for ESG profiles – both on the business side and under the auspices of compliance.
An agenda shift for all in the sector
Years ago, it was compliance that virtually disrupted the financial sector. Whereas compliance was a preventative measure, sustainability is now more an integral part of the business strategy itself, addressing environment, social responsibility and bottom line to create a strong incentive for clients/investors. When ESG and sustainability are discussed, the sector needs to mobilise professional manpower to address this – both from a strategic and business-oriented perspective, but also from a regulatory perspective.
“Years ago, it was the overall compliance agenda that was growing and needed to be implemented within and across the financial sector in order to minimise potential risks and ensure continued confidence. Similarly, the regulatory perspectives of ESG now need to be addressed, which in turn places demands on the sector to meet the requirements of and from the rapidly evolving sustainability market”, says Anita Blinkenborg, Partner at Compass Human Resources Group
High requirements on the sector
The sustainability agenda is placing vast demands on the financial market participants – and in a market with a shortage of manpower, it can be difficult to build up an organisation within this area. As a financial institution, you have no choice. In the sector, sustainability is both a strategic and regulatory discipline, and both perspectives generate requirements for skills and the number of resources. This does not make it easier for financial sector actors to find candidates for vacancies, which means that more resources often need to be focused on recruiting external profiles as well as identifying internal talents.
Sustainability as a force of attraction
Getting to the forefront of sustainability at all levels of a company can prove to have great attraction value. In a 2018 survey by Deloitte, 77% of Generation Z respondents said it was important to work in organisations whose values align with their own. The outlook suggests that the sustainability agenda, with its main focus on ESGs, will significantly shape the future of the job market – and come with ethical considerations for graduates. The new generation is more guided by ethical values that take precedence over salary and lunch scheme. Generation Z is also much more likely to change jobs if the company’s overall values are not in sync with their own.
ESG strategy attracts investors
A focus on sustainability is not only attractive to candidates, but also to investors. A clear and ambitious ESG strategy has become a basic requirement to attract investors. Valuations are adjusted as a direct consequence of a company’s ESG strategy – precisely because investors want to ensure the long-term perspective. Recent analysis shows that sustainable companies generate a higher return than the average.
Recruiting ESG profiles for the financial sector
Different types of profiles are needed when a financial institution is going to meet the demand and requirement from the market and the authorities. On one hand, you need people who can prepare and convey information about the ESG and sustainable initiatives and products, and on the other hand you need people who can ensure the regulatory perspective
One way to address this challenge is of course to look within the organisation in terms of identifying profiles with an interest in ESG/sustainability and further developing their competencies. Another solution is to look outside the financial sector and identify candidates who are professionally grounded in ESG/sustainability without necessarily knowing a lot about the sector. The third option is to look more internationally for potential candidates.
ESG is an overall agenda that, on the one hand, requires having people who can communicate and spread the message about the company’s responsible and sustainable financial products. On the other hand, it requires skills that can address the regulatory perspective. Both go hand in hand to help improve investor and consumer protection and strengthen the attractiveness and position of the company in the market in the eyes of customers, investors and employees.
Sustainability has become an integral part of many companies’ growth and business strategies – regardless of sector.