As companies in the financial industry hire up to boost their ESG credentials, the roles they’re adding appear to come with a pay premium.
And that premium, according to data from Revelio Labs reported Friday by Reuters, can be as much as 20%.
That hasn’t always been the case. As recently as early 2019, jobs with “ESG” in their titles were associated with slightly lower average compensation — although the sample size available at the time was relatively low, Loujaina Abdelwahed, economist at Revelio Labs, told InvestmentNews.
“The hiring picked up a lot in mid-2020 and early 2021 for ESG roles,” Abdelwahed said. “But it’s started decreasing again in the past few months.”
The findings, she said, “made a lot of sense, because around 2021, Biden came into office, and ESG really started to become a thing.”
And of course, demand for ESG-themed mutual funds and ETFs has grown significantly. Last year, despite performance headwinds, net sales for those products was slightly positive, while overall sales for all U.S. funds went negative for the first time since Morningstar began tracking sales, in 1993.
Survey data this week from Cerulli show that two-thirds of U.S. asset managers are increasing their spend on ESG-related staff and resources, with more than half focused on increasing distribution head count and nearly as many hiring for portfolio management and active ownership.
The pay trend for ESG roles appears to reflect demand for products and services, rather than a focus on compliance alone. The data that were compiled and analyzed by Revelio Labs included roles related to managing money at asset managers, investment firms and commercial banks. The analysis excluded regulatory and compliance roles at those firms, because those jobs reflected legal teams broadly, Abdelwahed said.
However, demand for ESG-related compliance roles could be ramping up, as regulators, including the Securities and Exchange Commission, are advancing new rules related to ESG.
To gather the data, Revelio Labs examined publicly available information on pay between January 2019 and March 2023, with the number of ESG job titles ranging from 256 to 669.
While average pay (controlled for seniority) went from less than $85,000 to about $90,000 for non-ESG roles during that time, it increased from about $75,000 to nearly $110,000 for those with ESG or sustainability in the title.
Demand for ESG roles increased from appearing to just over 0.01% of job postings in early 2019 to more than 0.09% by mid-2020. The frequency within job postings fell to about 0.04% by March, Revelio Labs found.
And despite the relative pay premium for ESG, most of the hiring has been for junior-level positions — a trend that has accelerated. While less than half of job postings for ESG in financial services were for senior-level roles in January 2021, that decreased to about 20% by March 2023, with a significant majority of positions being junior-level.
That trend could reflect cost-savings strategies, Abdelwahed said. However, the data also hint that people in ESG-related roles also have a longer tenure in those roles in the U.S. than those in traditional non-ESG positions, she said.
Across industries, jobs with the title “ESG specialist” currently have an average salary of nearly $73,000, with a range of $22,000 to $170,500, according to figures from ZipRecruiter.
Some roles pay much more than others. Those with “sustainability ESG” had the highest average at nearly $131,000, followed by ESG counsel ($120,000), ESG consultant ($100,000), ESG private equity ($99,000) and ESG compliance ($97,000), the ZipRecruiter data show.
The hiring and pay trends in the U.S. might be indicative of the relatively young market for sustainable investing within it. In Europe, where the market is much more mature, recent survey data reported by efinancialcareers.com show a high turnover rate (nearly 43% over three years) for ESG heads, portfolio managers, traders and investment analysts.
Additionally, data that the publication reported from recruiter Pearse Partners show that financial professionals in the U.K. with ESG in their titles are often paid significantly less than those without it.
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