Global investment managers remain in recruitment mode for environmental, social and governance (ESG) staff despite a growing political kickback against the process in the US.
The 10th annual Russell Investments fund manager survey found while the “hiring boom for ESG professionals has slowed”, most of the 225 firms polled were still hiring-up for specialists in the field.
Kris Tomasovic Nelson, Russell head of ESG investments, says in an analysis of the survey findings: “In 2024, 75% of respondents reported increasing their dedicated ESG headcount, particularly within sustainability teams. This brings the proportion of firms with dedicated ESG staff to 69%, up from 55% in 2021, and it underscores the rising significance of ESG expertise in shaping investment decisions.
“Beyond sustainability, ESG roles are increasingly spanning data analytics, compliance, risk management, and legal departments. This trend underscores the mainstream nature of ESG-aware investing, as regulatory requirements and client expectations continue to evolve.”
The mounting ESG staff costs, too, come during a fierce political kickback in a trend amplified by the recent Trump presidential victory.
Last week, for instance, 11 US states lobbed a joint action against BlackRock, Vanguard and State Street over allegations the three passive investment giants conspired “to artificially constrict the market for coal through anticompetitive trade practices”.
In a release, Texan Attorney General Ken Paxton said: “Texas will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda. BlackRock, Vanguard, and State Street formed a cartel to rig the coal market, artificially reduce the energy supply, and raise prices.”
He said the “investment cartel” threesome “collectively announced in 2021 their commitment to weaponize their shares to pressure the coal companies to accommodate ‘green energy’ goals” as signatories of the Climate Action 100 and Net Zero Asset Managers Initiative – although the three managers have mostly withdrawn from the lobby groups.
The Russell study found a “notable dip in indicated support for Climate Action 100+, as our survey reflects the announced departures of several U.S.-based and fixed income-focused asset managers”.
Regardless of “political and legal challenges in the United States, investment managers have maintained—and in many cases, expanded—their ESG commitments”, the report says.
“Adoption of the Task Force on Climate-Related Financial Disclosures (TCFD) framework grew to 59%, a slight increase from last year. This figure is expected to rise further as more countries, led by the UK, begin mandating TCFD reporting.”
Most respondents also recognised the “materiality” of ESG in investment decision-making, largely for risk-reduction (27 per cent) or return-enhancing (19 per cent) purposes.
Poor data quality ranked as the main barrier to ESG integration for 35 per cent of managers while only 1 per cent cited either negative performance risks of limited investment choice as a problem.
“When asked about the types of products experiencing the most growth, 36% of respondents indicated ‘not applicable,’ which may reflect recent industry-wide outflows in ESG product assets under management (AUM),” Tomasovic Nelson says. “However, among those who reported growth, ESG-integrated solutions were the most popular, with 27% citing demand in this area.”
The survey tapped almost 225 investment management firms across multiple asset classes, jurisdictions and sizes.