Transcript by Kensho.

Lindsey Hall: I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

This time last year, we did an episode of this podcast about how the hunt for ESG talent is evolving. And in that episode, we spoke to a recruiter about what he was seeing in the sustainability space.

Well, it turns out this is a topic that our listeners are pretty interested in. This episode is one of our top most downloaded ever. And since we're once again heading into Labor Day weekend in the US and since a lot has changed in the ESG and sustainability world over the past year, we decided this is a good time to revisit this topic. How does the search for ESG talent continued to change? What are companies doing differently? And what are job candidates looking for?

Esther Whieldon: In today's episode, we'll be speaking with 2 recruiters focused squarely on the sustainability space. First up, we'll hear from Kurt Harrison, a Partner with the global executive search and advisory firm, Russell Reynolds Associates, which has offices in 25 countries around the world. Kurt co-leads the firm's global sustainability practice.

We'll also hear the perspective of Ellen Weinreb, Founder of Weinreb Group, which is the women-owned boutique search firm focused on ESG and sustainability candidates. The firm has recruiters in San Francisco, New York and London.

Lindsey Hall: First off, here's my interview with Kurt, where he starts by explaining what has changed in his recruiting world in the past year since he came on this podcast. By the way, in discussing artificial intelligence or AI development, you'll hear him use the term LLM, which stands for large language models. He also mentioned Scope 3 emissions, and that refers to emissions that occur up and down the company's supply chain as well as when a customer uses the products.

You'll also hear him say that recruiting trends are very different depending on where you are in the world. Kurt talks about the shocking level of disparity in the conversation around sustainability in Europe and Asia Pacific compared to the U.S. Okay, here he is.

Kurt Harrison: Probably no surprise for anyone to hear, we have been extraordinarily busy for the past 4 or 5 years, partnering with our clients around the world to identify and recruit senior executive leadership as well as Board Directors who can deliver sustainability, ESG, climate and decarbonization expertise. So it's great to be here with you again, Lindsey.

Lindsey Hall: Well, thanks so much for coming back. And I think when we had this conversation last year, one thing that stood out to me is you talked about the insatiable demand for ESG, sustainability, climate talent. So I would love to start our conversation just by hearing what has developed over the past 12 months.

Kurt Harrison: So in this world, as you know, everything is changing constantly. It's a very dynamic environment, especially across ESG and sustainability. And so the biggest change I would say is that there's been a shift on the part of our clients in terms of what they're looking for to help deliver sustainability across the organization in a very commercially accretive way.

Organizations that we would consider to be best-in-class from a sustainability perspective are not messaging their employees and their customers and their clients that, "We're embracing sustainability because it's the right thing to do." That argument doesn't really work.

But if you send the message that, "We are embracing and incorporating sustainability into our strategy because it's the commercially smart thing to do," you get a lot more uptake and a lot more buy-in both internally as well as externally. So ESG leaders and sustainability leaders today are very focused on business value creation.

So a lot of organizations have spent the past few years hiring Heads of ESG, Chief Sustainability Officers, et cetera. And the mandate initially was for those folks to come in and to build the enterprise-wide policy and strategy and framework for sustainability, and then also work with their investors and their clients and their customers to really engage them on how sustainability permeates every aspect of the organization and is intimately interwoven into all the different business lines.

So a lot of that has taken place. And so because there's been so much hiring in this space, there's a bit of a pause now, if I'm honest. And we're not seeing the maniacal levels of demand for senior executive leadership around ESG and sustainability that we saw in 2020, 2021, 2022.

Part of that is because there's a natural digestion phase going on right now where all of the hiring that's taking place is now working on implementing the policy and strategy and framework into the organization.

So the focus has shifted from building the policy and creating the strategy to really operationalizing the policy and the strategy to drive sustainability into the business and across the organization. So it's much more about implementation, integration and execution than it is about policy and strategy.

Lindsey Hall: Okay. Now the situation you just described where you're seeing people saying, "We're doing sustainability not because it's the right thing, but because there is a strong business case for it," is that a change? Is that a shift that you're seeing from when we talked a year ago?

Kurt Harrison: I think it's been occurring over time. If you go back 4 or 5 years ago, a lot of the ESG movement came out of impact investing. And you had the impact crowd who was, at the time, suspicious of, let's say, the for-profit crowd. The impact investing crowd was at one end of the spectrum and the for-profit investing crowd was at the other end of the spectrum. They were mutually distressful, mutually antagonistic and didn't like to hang out together very much at all.

But what we've seen is a dramatic narrowing of the spectrum, and the impact investors and the impact crowd began to realize that return is not a bad thing and in fact, return can actually enhance your impact.

Simultaneously, the for-profit crowd began to realize that if we incorporate various ESG metrics into our investment process or our business strategy, we can actually generate better returns and create more commercial value. So it's been happening over time. And I think now, again, most evolved sustainability organizations are viewing it as a business value creation opportunity as opposed to a functional compliance requirement.

Lindsey Hall: Okay. That's helpful context. Another thing that you brought up when we talked last year and I wanted to check in on is you talked about with the recent passage then of the Inflation Reduction Act in the U.S., this big climate bill, and the regulatory environment that was developing.

You were saying you were seeing a lot more focus on the E, on the climate, net zero, greenhouse gas emissions, et cetera, in the recruiting focus. Has that continued to be the case in the wake of the Inflation Reduction Act over its first year? And if so, can you tell me some more?

Kurt Harrison: Yes. No, I think it has definitely continued to be the case. What we've seen is that each of the dimensions of ESG has become so important and so complex in their own right that most organizations need to have dedicated leadership around each of the individual dimensions.

So the E has evolved into climate change and responses to climate change and really driving decarbonization across the organization. The Inflation Reduction Act was a huge shot in the arm for that. And basically, a lot of that money is being spent rebuilding the grid, rebuilding our infrastructure and driving renewable and alternative energy initiatives.

Lindsey Hall: Okay. And we wanted to go a step further and tell listeners how these developments in the U.S. are playing out in the work that you do.

Kurt Harrison: Yes. So a lot of the emphasis has come from investment management firms, and you can see how it's become a much more difficult environment now for private equity firms, private credit firms, alternative asset management firms to raise funds. The fundraising environment has gotten much more competitive, much more difficult.

The 2 areas, however, that are still seeing a lot of investor interest are generative AI, obviously, right, so LLM models that can deliver that, and climate tech. Everyone is searching for climate tech solutions. And so whether that's carbon capture and storage, direct air capture, repurposing existing fuels and technologies, all of that is still attracting significant amounts of global capital.

So the demand that we're seeing on the talent side are individuals who have an expertise around climate tech, climate tech investing, infrastructure investing, decarbonization. And so whereas a couple of years ago, it was more about hiring the really strong policy or strategy person from an NGO or a bank or an asset manager or even the U.S. government. Now everyone wants to hire the Head of Supply Chain Decarbonization from Schneider Electric. That's the hot profile in 2023.

Lindsey Hall: And what is it about that person that is speaking to these companies that are hiring? Why that person?

Kurt Harrison: Because all of these companies understand that they're going to have to be able to have credible metrics and reporting around their emissions footprint. Because no matter where you stand politically and whatever your view is on climate change or sustainability, if you have a company, you are part of someone's Scope 3 emission supply chain.

So whether you want to or not, if you want to continue to do business with other companies, you're going to have credible measurement and reporting capabilities around your climate footprint or you'll no longer be able to do business and you'll go out of business quite quickly.

So part of it is regulatory-driven. Part of it is investor-driven. Part of it is business-driven. But whatever the impetus, most organizations now understand that they're going to have to be able to report on their Scope 3 emissions. And so having someone from a company like Schneider Electric or a Honeywell or an Amazon, companies that are partnering with their clients to help them decarbonize their operations, those individuals are in very high demand.

Lindsey Hall: Okay. Now some of this discussion we've been having has been focused on the U.S. and the Inflation Reduction Act. But the work you do, as you mentioned at the beginning, is global. If we zoom out a bit, how would you describe to our listeners the global landscape or how things differ in recruiting for sustainability talent in different parts of the world?

Kurt Harrison: It's a great question, Lindsey. And it's shocking to see the disparity in the level of conversation around sustainability with our European and Asia Pac clients versus our U.S. clients. In Europe, sustainability is just good business. They've been doing it forever, for decades. It's part of who they are. It's ingrained in the culture. It's part of their strategy. It's a priority for the CEO and for the Board.

And so when you ask a company or a senior executive leader in Europe, "What are your views on sustainability? Is it still important?", they're like, "Well, of course, it is. Why wouldn't it be? This is who we are. It's what we do."

It's a very different conversation here in the U.S., where there's still much more of a conversion phase to go through in illustrating to CEOs and Boards in the U.S. why sustainability is not just the right thing to do, but the commercially smart thing to do. So it's a given in other parts of the world.

So we're still seeing tremendous demand in Europe for CSOs, Heads of ESG, et cetera, more so than we're seeing in the U.S. right now. And the biggest uptick in percentage terms is actually coming out of Asia. We have seen tremendous acceleration in the demand for executive talent in Singapore, Japan, really across South Asia, India. Australia is leading the way.

Singapore is a great example because the government of Singapore now has mandated a law that every single public company Board Director has to undergo sustainability training. Every single public company Board Director. In the U.S., they'd think you were crazy. In Singapore, it's just good business, right? So that sort of illustrates the dichotomy, if you will, between the U.S. and the rest of the world.

Lindsey Hall: Okay. That's fascinating. What would you attribute that big disparity to?

Kurt Harrison: It's regionally specific. So Australia, you had a change of government last year and the new government has basically said, "We are going to do everything we can to remediate the effects of climate change on Australia." I mean, Australia is burning. They are feeling it in a hugely significant way.

So I was actually in Australia earlier this year meeting with our clients over there. And we met with BHP Billiton, the huge mining company, and they have completely changed their business model away from coal and other fossil fuels and are now focused almost exclusively on lithium and cobalt and copper, things that are going to drive renewable energy going forward, EV creation going forward. So they have completely transformed their portfolio. U.S.-based companies, not so much.

So Canada is the same way. Canadian companies are very focused on climate change, very focused on the impact of that on Indigenous Peoples, much like Australia. So for them, that combines the E and the S of ESG, and it's just part of good business and a part of every company's corporate strategy in a way that it simply isn't here in the U.S.

Lindsey Hall: So we've been talking so far a lot about the corporate company hiring perspective. We'd also love to know, on the flip side, are you hearing anything different from the candidates that you're recruiting, different expectations, different things that they're looking for from a potential employer?

Kurt Harrison: I think one thing that we have seen is candidates in this space want to have as much impact as they can. And so for them, it's crucially important that sustainability is an overt and stated priority of the CEO and the Board of the company or else the candidate is not interested in going there.

Because they know, without that top-down mandate, that top-down support, they cannot be successful in the role, and they're quite likely to get caught up in greenwashing as the company looks to be or to do the bare minimum, if you will, to meet whatever requirements they're facing.

So the most important thing is it's got to be a priority for the organization. The roles themselves continue to ascend in terms of who they report to and the level of the seniority within the organization. 3 or 4 years ago, ESG and sustainability were sort of mid-level functional roles. Now they are Managing Director, Senior Vice President roles reporting directly into the CEO or the C-suite and with very frequent Board interaction as well.

So it's all speaking to a much more senior profile to be able to deliver against all of the different initiatives and mandates that go into a senior executive leadership role around ESG and sustainability.

Lindsey Hall: Esther, we heard Kurt say that sustainability candidates these days are looking for companies where they can have an impact. It was striking to me that I got a very similar answer when I posed the same question to another recruiter. I asked Ellen Weinreb what candidates are looking for in a potential employer.

Ellen Weinreb: They're looking for impact. At the end of the day, I get that on a daily basis. It's where can they have the most impact. So that's clearly what they're looking for when they're exploring an opportunity. And companies need to demonstrate their sincerity and their integrity in meeting their goals and their commitments to attract talent.

And we could talk a little bit about Generation Z and the millennials. The new hires, if you're looking at that pipeline of talent, they care about these issues more than other generations. And so companies also, through their hiring and talent acquisition teams, are thinking about how to communicate about their own sustainability and ESG commitments. It comes up in interviews, and we definitely hear that through the talent teams.

Lindsey Hall: I also talked to Kurt about people early in their sustainability careers. Now a lot of our audience is the senior level sustainability professionals, but we also hear from professors, academics and students who are early in their careers.

And when we talked last year, you said that you've told your kids, "You guys should go into ESG because that's where the demand is right now." Given this landscape that we've been discussing, which is not the easiest, especially in the U.S., would your advice change at all to people early in their careers?

Kurt Harrison: Yes. It's a great question. And so what we have not seen is any slackening of interest on the part of people earlier in their careers wanting to make sustainability their desired career path. We're seeing far more examples of the best colleges and graduate schools and business schools in the world all creating very evolved and sophisticated curriculum around sustainability. It's an area of concentration in most business schools now.

And so we're seeing much more in terms of interest from people earlier in their careers coming out of business school, coming out of colleges with a specific background and training in sustainability wanting to make that career their choice for the rest of their life, really.

And that's new. That wasn't the case 3, 4 or 5 years ago. It's great to see that level of demand, but there still is a lot of activity in the space. Again, it's not as overwhelming as it was. And a lot of companies, I think, have fallen prey to what we're calling green hushing.

So green hushing is when a company continues to drive an important sustainability agenda, both internally and externally, but they're not broadcasting it. They're not talking about it. They're not publicizing it because they don't want to trigger any potential ill will or commentary from various parts of the political spectrum.

So green hushing is far more preferable than greenwashing, right? I'd rather have companies continue to focus on sustainability and maybe not talk about it as much as opposed to companies talking about it but not doing anything about it. So there is that element of it. And so maybe it's not as much of a no-brainer as it was from a career perspective a few years ago. But at the same time, it is definitely not going away.

I had a great conversation the other day with a Chief Sustainability Officer for a major global consumer products food company. It's a name that everybody knows. Everyone has their products in their refrigerator and in their pantry. And I was asking him this exact same question.

I said, "Look, you guys are a leader in the space. You've been at it forever. Are you sensing any sort of pullback internally from your Board or the CEO or pullback from your investors, pullback from your line of business leaders saying, 'Maybe we shouldn't be as focused on sustainability as we have been'?" And he said, "Absolutely not."

And the example he gave was a great one. He says, "Look, one of the things that we do is we make potato chips. And therefore, we have a vested interest in American farmers and farmers around the world being able to grow potatoes."

"And when our farmers and our supply chain, both here in the U.S. and around the world, come to us and say, 'We are having a harder time growing potatoes because of various environmental and climate changes that are affecting the crop cycle, the seasonality of it, the cost of water,' things like that, we have to be able to respond to that. So we have to partner with our suppliers to help them grow potatoes sustainably and profitably for themselves so that we can make potato chips."

So he said, "Whatever your views are politically and whatever your thoughts are on climate change, we don't care. All we want to do is make sure American farmers can grow potatoes." And so I think you'd be hard-pressed to find anyone out there who is against American farmers being able to grow potatoes. And that's a really good illustration, I think, of defining this in a business lens as opposed to a political lens.

Lindsey Hall: Earlier in our call, you talked about how early in ESG's journey you had this divide between sort of the for-profit and the not-for-profit crowd and how you've seen some narrowing of that over time. And this idea that we need to come together across silos and find ways to collaborate, whether it's talking across the political spectrum or whether we're talking between private, public sector profit, nonprofit, is something I hear come up a lot in this podcast and in interviews and sustainability conferences.

As we're heading into COP28 later this fall, where that's going to be incredibly important, I just would love to end by hearing your thoughts on that. What is the path forward for kind of narrowing some of these wide gaps that are necessary in order to address big issues like climate change?

Kurt Harrison: Yes. So what people don't really understand outside of your business and our business in this space, in general, is that the big asset managers like BlackRock, et cetera, they're not the ones who are driving the dialogue around climate change or ESG, right?

They are asset managers. They are managing other people's money. It's the people's money who they are managing, the big global institutional investors, sovereign wealth funds, the pension funds, the insurance companies.

Those are the institutions who are prioritizing having a climate change metric incorporated into an investment process because they are very protective of their investments, right? They don't want to invest in a strategy that's not incorporating all elements of risk management, whether it's macro risk, economic risk, societal risk or climate risk.

And so the trillions, multiple trillions of global capital being invested today on behalf of the big global institutional investors is demanding that their money be invested in a way that is sustainable. And sustainability means long-term success. Who doesn't want long-term success? No one. They are demanding that the asset managers of the world create strategies and invest their capital in a way that is sustainable to generate returns over the long run.

It's hard if you're someone who is involved in this space and you keep hearing all the rhetoric and all the political nonsense on both sides, quite frankly. It can be discouraging. Just keep thinking back to the fact that there are multiple trillions of dollars around the world that are not going away, and who are demanding that their money is invested sustainably to generate the maximum long-term return.

Esther Whieldon: That's a positive message. Although there has been a bit of a pause in hiring, there are investors around the world who see sustainability as just good business.

Lindsey Hall: It's also encouraging to hear Kurt say he sees no slackening of interest by people early in their careers pursuing sustainability. Lastly, let's turn back to my interview with Ellen, where she talks about the trends she sees ahead for sustainability recruiting. She gave me a list of 3 things on the horizon.

Ellen Weinreb: The potential for more layers or the legal department to play a stronger role in ESG, so that's one. It's just understanding given this society and where we are right now the litigious risk that the lawyers are getting involved. Lawyers are doing very well right now.

The other is that given the need for the data to be verified and reported on, data is now moving to the CFO's office. And so we are seeing a need for more finance acumen like CFAs is added into the job requirement or request. So that's the other. It's the CFO's office.

And the third one I see coming down the pipe, and I think we're kind of early days here, is around skills building and skills gap, which is that there's an old tenet -- I mean, I've been working in this field for 25 years and I've been hearing for 25 years, "Sustainability and ESG is everyone's job and everybody should own it." But what does that actually mean?

There's a level of education that's needed at the Board level, at the senior leadership level and then also amongst these companies that are making net zero commitments. And so therefore, I see the potential for companies adding training to get more individual stakeholders upskilled in ESG so that they are able to meet these really ambitious goals.

Esther Whieldon: So there's some definite challenges ahead for ESG and sustainability talent, including what we just heard Ellen talk about: the need for continued education of Board members and senior leaders.

Lindsey Hall: And also, it sounds like there's some opportunities. It was striking to me to hear Kurt talking about the differences and how different parts of the world approach ESG or sustainability. We'll be seeing how these different perspectives play out on the global stage in the months ahead as sustainability stakeholders prepared to gather in Dubai for COP28 in November and December.

Thanks so much for listening to this episode of ESG Insider, and a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

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