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Lindsey Hall: Hi. 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. 

Anyone who's been following the sustainability space in recent years knows there's been an explosion in interest in sustainability and environmental, social and governance, or ESG. And this plays out in a lot of different ways that we regularly talk about on this podcast. One topic I'm hearing about a lot in recent months is hiring. You might have seen the headlines about the fierce competition among companies seeking ESG talent. You might be a student or a professor at one of the many universities now offering sustainability programs or maybe you're just on LinkedIn and see the thousands upon thousands of job postings for roles related to ESG.

And that makes sense when we've seen such huge changes in this space as ESG has gone much more mainstream. Over the past few years, we've seen thousands of organizations setting net-zero goals. We've seen rapid developments in global ESG regulation and sustainability standards, data related to climate, nature and biodiversity improves by the day. And that's all just naming a very few examples.

Esther Whieldon: All this development is not limited to any single sector, that's not even just the private sector experiencing these dynamics. For example, in a recent episode of this podcast, we spoke to Ravi Menon, the Chair of Network for Greening the Financial System, or NGFS.

That's a network of central banks from around the globe working to manage and measure the risks of climate change to financial stability. Ravi said he thinks the world is going to find a severe shortage of talent and expertise in these areas over the next 3 to 5 years.

Lindsey Hall: We wanted to get a better understanding of how exactly hiring in the ESG and sustainability space is evolving. So for today's episode, we're going behind the scenes of ESG recruiting in an interview with Kurt Harrison. Kurt is a partner with the global executive search firm, Russell Reynolds Associates, where he leads the global ESG & Sustainability Practice.

Esther Whieldon: Lindsey, it's kind of fitting that we're tackling this topic of hiring, talent and ESG jobs because we're heading into Labor Day weekend in the U.S. For those outside the U.S., the U.S. Department of Labor describes this holiday as "an annual celebration of the social and economic achievements of American workers."

Lindsey Hall: As you'll hear Kurt say, the demand for ESG talent is insatiable. He gives us insights into the kinds of questions he gets from job candidates and also the kinds of things companies are looking for in their sustainability hires. One note, you'll hear Kurt refer to an MPA, and that's a Master of Public Administration, a type of master's degree. Okay, here's our conversation.

Kurt Harrison: We have been extraordinarily busy for the past several years really, identifying and recruiting senior executive leaders around ESG and sustainability for our clients around the world. And this is a theme and a dimension that really transcends industry, transcends sector, geography, regions, et cetera. It is a universal theme that shows no sign of slowing down.

Lindsey Hall: Okay. And when we've talked previously, you've mentioned that there's not just this explosion and interest in the ESG and sustainability space, but also you've seen it evolve over time. And I'd love to hear your perspective. How is this change playing out in the recruitment space? What are you seeing change over time?

Kurt Harrison: Yes. It really has completely evolved, I would say, in the last 3 or 4 years from what were sort of mid-level functional initiatives that are now top of the house global senior executive leadership roles. So the evolution of this was really 3, 4, 5 years ago, investors began asking questions of companies around ESG and sustainability.

And at some point, the CEO of the organization literally got tired of being asked questions about ESG that he or she couldn't answer. And so they decided to appoint someone internally. So what most organizations did was they repurposed someone internally, sort of at the mid-level, maybe VP level of the organization, who is at the time, sitting within legal or compliance or marketing. And the CEO would go to them and say, "Okay, you're the ESG person, figure this out. Build us a baseline credibility and some sort of framework and deal with these investor questions." And that was literally all it was. And that worked for a year or two.

But in 2020, that didn't work anymore. And in 2022 and beyond, your Head of ESG needs to have actual ESG domain expertise, right? It sounds simple, but it wasn't always the case. 

The early days of ESG and sustainability executive leadership really grew out of financial services, both for the banks who are recruiting and appointing heads of sustainable finance as well as the investors. So traditional investors, alternative investors, private equity, real estate, et cetera, hiring heads of ESG to really integrate ESG metrics into their investment processes. So that was really the early stages of this. And then it really began to spread into corporate America.

Europe has been pretty far ahead on this for a long time. It's been more regulatory policy in Europe, and a lot of it has been corporate policy as well. So it's much more ingrained in the DNA of European organizations than it is here in the U.S. So for the U.S., it was really an educational process.

And the early days of ESG from the corporate side tended to be around corporate social responsibility, or CSR. In the industrial and energy space, it was about employee health and safety, or EHS. In the consumer retail space, it was about supply chain management and vendor management, risk management, things like that.

So all of those initiatives that were somewhat industry-specific began to evolve away from purely internally oriented operational roles to being more balanced in terms of both internal and external expectations and creating a much more holistic framework to truly integrate sustainability across the organization.

Lindsey Hall: Okay. And so we're using a couple of different terms here, like you just mentioned CSR, EHS, ESG, sustainability. Is this just semantics? Or do these different terms, are they really important?

Kurt Harrison: Yes, it's a very good point because ESG and sustainability in some quarters can be interchangeable. But in fact, they're very different things. So when we think about a Head of Sustainability or a Chief Sustainability Officer, these are more sort of internally oriented roles focused on improving operational efficiency, right?

So these are very operationally oriented roles, so improving energy efficiency, reducing greenhouse gas emissions, making net-zero commitments, improving supply chain, reducing your real estate footprint, lead certification of buildings, circular economy, recycling. So very internal operationally oriented roles.

That tends to fall more under sustainability. ESG tends to be more externally oriented. So these individuals are creating the enterprise-wide strategy and policy and framework and then articulating that enterprise-wide strategy policy framework to a number of different constituencies, both internal and external.

So they're working with the regulators, working with investors to articulate to them how ESG permeates everything that the organization does and then also working with line of business leaders internally to help them integrate that enterprise-wide policy and strategy and framework into their own organizations. And so for someone to do all of that credibly, this has pointed to the continuing rise in the level of seniority for what we would consider to be best-in-class ESG leaders.

And the main reason for that is that these people have to effectively influence across an incredibly wide array of stakeholders. Your Head of ESG and your Chief Sustainability Officer need to seamlessly go from a conversation with the Board to the CEO, to a supply chain vendor, to a regulator, to an institutional investor, to a client or a customer of the firm, to an internal line of business leader and be viewed as credible across all those different constituencies.

So the requirement that these people can credibly influence across this incredibly wide array of stakeholders has pointed to more and more senior individuals taking on these responsibilities.

Lindsey Hall: Okay. And I want to dig into one point there, just to make sure I'm hearing you correctly. It sounds like you're saying that the Head of ESG and the Chief Sustainability Officer, those are 2 distinct roles that sit in two distinct parts of the company in your experience and your perspective. Is that right?

Kurt Harrison: I think that is right in certain industries. So in financial services, that is correct. They usually will have a Head of ESG, separate from a Head of Sustainability. In corporate America, it tends to be more Head of Sustainability or Chief Sustainability Officer, and they generally aggregate both of those sets of responsibilities under that person.

So we haven't seen as many corporate entities hire a specific Head of ESG. All of those responsibilities tend to fall under the Chief Sustainability Officer.

Lindsey Hall: Okay. Part of the reason I'm asking is this is a really interesting topic. And I think there's not always a sort of black and white or clear answer. We recently did an episode of this podcast about the rise of the Chief Sustainability Officer. And one of the kind of questions that came out of that episode is just how exactly do you integrate sustainability and/or ESG into the whole of your business? And so would love to dig in with you a little bit more there.

Kurt Harrison: Yes, I think that is what's driving the necessity for these individuals to be business people first, right? So these are not functional roles. These are business value-creation roles. And so the template for what we would describe as being a best-in-class Chief Sustainability Officer or Head of ESG is someone who grew up in the business.

So whether that's financial services or energy or industrial consumer retail, health care, technology, they began their career in the business working within the business and a business executive-type role. And after doing that for 5, 6, 7, 8 years, they began to wonder, "What's next in my life and in my career?"

And so they -- many of them chose to go to business school to get an MBA. And while they were there, they were introduced to sustainable finance or sustainable investing. And so this is actually really interesting. I want to pivot my career toward sustainable business. And so they concentrated on that as part of their MBA.

They may have even bolted on an MPA in public policy or environmental science. And then after graduating, they could go work for an NGO, like the Environmental Defense Fund, or they might go work for an impact fund like Generation Investment Management or TPG Rise, KKR Impact, et cetera, and they will do that for a couple of years.

So now they have the fundamental industry expertise from the early phase of their career. They have very hands-on and relevant academic credentials, and they have hands-on practitioner experience, either at an NGO or a consulting firm or an investment firm, specifically around ESG and sustainability.

And so then they can synthesize all of those dimensions to their background and go in-house to a senior executive leadership role around ESG and/or sustainability and really drive the enterprise-wide policy creation and build out a framework to deliver that internally and externally.

Lindsey Hall: One thing I'm hearing increasingly from our listeners is that their students or professors in sustainability studies. And that's been a real change, just even over the last year. We've been talking a lot about the more senior recruiting that you do, but would love to dig in a little more on the entry-level side of things. What trends are you hearing in terms of people getting into sustainability even in their graduate studies?

Kurt Harrison: Yes. I mean if you do a simple LinkedIn check and you go to LinkedIn and you clicked on the Jobs tab, and you type in ESG or sustainability and you hit Go, you'll literally get 7,000 or 8,000 job postings. I mean it is unbelievable. So all of the consulting firms are actively hiring people with this background, the investment firms, industrial, retail, consumer. It's literally in every sector, every industry, every geography. And so I've told my kids, you guys should go into ESG because that is where the demand is right now and it really is insatiable. And just quite frankly, it's just a severe supply-demand imbalance.

There haven't been training programs or educational programs or corporate programs designed to develop leaders in the space. And so it's really kind of like all brand new and a fantastic opportunity for people who are earlier in their careers to sort of jump start that into ESG and/or sustainability.

Lindsey Hall: Okay. And from your perspective, what's your best advice for people who are kind of earlier in their careers or just getting started. How do you navigate that Wild West you just described with thousands and thousands of job postings? What are the kind of key things that candidate should be looking for? And what are the key things that companies are looking for in sustainability hires?

Kurt Harrison: Yes. I think the most important dimension when a candidate is considering joining a company in an ESG role or a sustainability role, the question we get asked most often by candidates is how important is this to the Board and the CEO of the organization, right? Is this a fundamental corporate strategic priority? Or is this sort of a compliance functional necessity?

And you can tell that by how visible or vocal the CEO is about sustainability or if they've been publishing sustainability reports or things like that. Is it even mentioned on their website, because if there isn't that fundamental strategic prioritization of sustainability at the Board and CEO level, it's very hard for an organization to truly create a best-in-class framework that would be compelling enough to attract top-tier talent to join the organization.

So the first question to ask yourself, if you're considering a move like this and considering an opportunity with a given firm, is how visibly and vocally important is this to them as a fundamental corporate strategic priority. And then the second piece is in terms of qualifications. Just be a very agile, intellectually curious business person. The fundamental commercial acumen and business expertise that you develop in whatever industry you happen to be working in, in the first 3, 4, 5 years of your career is crucial. Just that acclimation into the business world in general.

Most people going into entry level or sort of junior level ESG roles do not have an inherent EHG domain expertise, but they have a passion for mission and for purpose, and understand how mission and purpose are not negative from a commercial perspective, but in fact, can enhance a commercial perspective in any organization. So I think the demographic that's coming out of universities and business schools now is very involved and interested in pursuing purpose as well as profit. And so those folks are a natural constituency to consider these types of opportunities.

Lindsey Hall: The first topic you talked about, making sure that this is a strategic priority, that's really woven into the goals of the business. That kind of speaks to this question that we touched on earlier, where exactly should these functions sit? What should the sort of chain of command be? Should these rules be reporting ultimately into the CEO, into the CFO? And what do you look for when you're looking for something like this? How should the Board play into that?

Kurt Harrison: Yes. Great question. So I mentioned earlier that the first questions that executives will ask us about an opportunity is always, "How important is this to the Board and CEO?" The second question is always, "To whom does this role report?" And so that has also evolved over the past 3, 4, 5 years from what was sort of a mid-level functional reporting line into a business line of reporting. So for a smaller organization, this can report to the CEO or to the President or to the CFO.

What we've seen in really corporate America outside of financial services, is these senior roles tend to report to the general counsel. And so every organization is different. Every structure is different. Every culture is different. And so what we advise our clients on with regard to reporting line is that this role needs to report to the person internally who can best position this individual to have the influence and access required to be successful in this role. And so in some firms, that's the CEO; in some firms is the President, CFO, COO, GC, et cetera. And every firm is different.

They'll know where it should report. What we've seen a conscious movement away from is having this role report into compliance or risk management or marketing. And especially marketing because if it reports into marketing, investors will question how seriously is the company taking this? And is this just a greenwashing marketing ploy?

Lindsey Hall: So far, we've been talking fairly theoretically about hiring practices. So I asked Kurt if he could pull back the curtain and give us more insight into the kinds of recruitment conversations he's having on the ground with clients.

Kurt Harrison: Yes. I mean it depends on where the client is in their evolution where they are on their ESG journey. And so we've created a diagnostic that we work with our clients on, and a series of questions they can ask themselves to sort of figure out where they are in their journey. Most organizations are pretty nascent in their journey, unless you're Unilever or Walmart.

You're still pretty early days in your sustainability journey, but you're evolving toward best-in-class. And so what we're seeing now is that a couple of things. Number one, the demand for these types of individuals remains insatiable. And despite the downturn in the markets, despite some headwinds globally, both geopolitically and socially, and also some of the noise in the marketplace about ESG being a bad thing and things like that.

None of that has dampened the demand for senior executive leadership around ESG or sustainability. So that remains ongoing. And I would say that because there's been so much movement over the past 18 months to 2 years, a lot of people are fairly new in their roles, and they're not looking to make a move.

So it's getting harder and harder to find someone who has the requisite skill set, has the requisite influencing capabilities and who is open to a move who hasn't just changed jobs to fill a new role for a client that we're working with. So there's definitely a bit of a supply-demand imbalance at present.

Lindsey Hall: Okay. Yes, that noise that you talked about around ESG. Given that, I wonder if -- when you -- you said you talk to your kids and you recommend getting into ESG, do you get any more specific with your recommendation? Do you say, "Hey, like within ESG, I think really the E or the climate is the way to go. Or I see a real demand for the S in particular." Or how do you frame it?

Kurt Harrison: Yes, it's a great question. So what we've seen is really for the past couple of years, -- and this might -- is especially true in financial services and mostly true in other parts of the world as well. When an organization is talking about ESG, they're generally talking about the E. We recruited a lot of Heads of ESG and none of them have been asked to advise the Board on governance.

Very few of them have taken on responsibility for DE&I on the S side or cybersecurity on the S side. And I think the G of ESG is really a board issue and a Board topic and very specific to that. The S of ESG has evolved into DE&I and community relations and social impact and things like that, whereas the E is really what most people are focused on, and that's around climate.

And so what I would expect, and this is my own personal view is that over the next year or 2, we will eventually deconstruct ESG, if you will, and the G will be its own thing as it always has been. The S around DE&I and social impact, and community relations, and cybersecurity and executive compensation. Those are really almost human resource issues.

They will continue to be extraordinarily important. But it's pretty much, I would argue, impossible to find a Head of ESG, who is a world-class leader on the E, a world-class leader on the S and a world-class leader on the G, all at the same time. I don't think that person exists.

And so most of the demand that we've seen for senior executive ESG leadership has been heavily predicated on the E, around climate, net zero, greenhouse gas emissions, et cetera. And so given the climate bill that just passed and the regulatory environment that's being created, my guess is over the next 2 or 3 years, we'll be recruiting "Heads of Climate" versus Heads of ESG.

Lindsey Hall: Given that landscape Kurt just laid out, I asked him where this leaves the S in ESG. At the start of COVID, we did see increased focus on social issues like human rights and supply chains and the way that companies were treating their employees and ensuring worker safety.

And in fact, we've had guests on this podcast like Asahi Pompey, who's Global Head of Corporate Engagement at Goldman Sachs, come on and talk about the fact that the S does tend to get less focused. Where does this leave us balancing the E and the S? Here's Kurt again.

Kurt Harrison: I think there are just 2 different conversations. The S is going to be as important as the E in perpetuity because if you don't have a diverse and happy workforce, you're not going to be in business for very long. I think the S has had the challenge of articulating how a more sophisticated approach to DE&I and employee health and welfare translates into business value commercial success. 

Whereas a climate policy that's best in class can be more easily articulated in the business value creation sense, in terms of gaining new clients, risk management, investor relations, all of the above. So I think that the Head of the S, if you will, or the Head of DE&I will be an extraordinarily senior and important role for every organization, but it's going to be separate from the Head of ESG and/or the future Head of Climate.

Lindsey Hall: Kurt said part of the evolution he's seeing involves the kinds of companies that are searching for ESG and sustainability talent. He describes a shift from Wall Street to Silicon Valley.

Kurt Harrison: This ties into the E, specifically around climate. And what we're seeing is a massive reallocation of capital on the part of big institutional investors, into climate-specific strategies. So that could be climate tech, could be venture capital, could be growth equity focused on climate.

But all of the big traditional and alternative asset management firms have raised billions and billions of dollars to focus on climate funds, either launching new funds or building out existing climate funds. And so that's going to translate into the necessity of recruiting talent to manage those funds, and also to the organizations or companies that they invest in to really make sure that those companies have credible ESG leadership around the organization.

Part of it is helping the ExxonMobils of the world on their energy transition. And then part of it is identifying the venture capital growth equity companies out in Silicon Valley, who are working on carbon remediation strategies, carbon remediation technology, climate tech, hydrogen fuel, those sorts of things that are attracting a lot of investment dollars from the big investment firms around the world.

Lindsey Hall: Yes. We've talked a lot on this podcast about the fact that there just needs to be such a ramp-up in investment in technology, if we're going to meet the goals of the Paris agreement, if we're going to meet all of these climate goals. So it's interesting to hear what you're seeing in the Silicon Valley space.

Kurt Harrison: Yes. And so there's a lot happening out there right now. And a lot of the VC and growth equity for the past number of years has been more focused on health care and technology. And we're now seeing a big shift in terms of much more interest focused on climate tech funds and climate strategies in that ecosystem.

Lindsey Hall: So Esther as you can hear, Kurt sees no end in sight to this demand for sustainability and ESG-related talent. At the same time, recruiting is changing. He pointed to the shift from broad ESG rules to ones that are more specialized in specific tenets of ES&G, and with a focus on climate in particular.

Esther Whieldon: And speaking of climate, please stay tuned as we turn our attention to a busy Fall season of climate events. For example, we'll be on the ground in New York City for Climate Week in September, which will include an event hosted by S&P Global Sustainable1. See the link in our show next if you'd like to register.

Lindsey Hall: 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.

Copyright © 2022 by S&P Global.



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