Seven–in–ten investment professionals use ESG data, but only 11% equipped to understand it.
Although 90% of investment professionals expect an increased commitment to ESG research by their organisations, just one-third currently employ dedicated ESG specialists, according to a new report from the CFA Institute. The report calls for the investment industry to address its skills gap in ESG analysis.
As of 2020, 85% of the CFA Institute’s members take ESG factors into consideration in their investing decisions and processes (up from 73% in 2017), yet the number of investment professionals within firms that are equipped to manage ESG research is comparatively low.
The CFA Institute analysed over one million investment professionals on LinkedIn and found less than 1% disclosed sustainability-related skills in their profile. Comparatively, 26% of respondents to the survey said they have “sustainability expertise”. The CFA Institute also analysed over 10,000 investment job listings, of which 6% specified understanding sustainability metrics as a “desirable skill”.
“Investment firms that incorporate sustainability into their business models need access to specialist knowledge to enrich their investment capabilities and to bridge the data gaps,” said Rhodri Preece, Senior Head of Industry Research for the CFA Institute.
Training in ESG investing has increased, the CFA Institute noted, but only 11% of survey respondents considered themselves “proficient” in the area. Only 11% said they were currently being trained to take on ESG research responsibilities, even though more than 70% said they have an interest in accessing ESG-related training.
ESG analysis is playing an increasingly important part in the investment process, with 69% of respondents stating this forms part of their current job roles, and 73% claiming they use ESG company ratings in company analysis.
Preece said training needs to be prioritised to broaden the investment industry’s understanding and capabilities around ESG issues and to properly capitalise on the available data. “Education and training in the ESG space, along with the rise of alternative data sources and enhanced disclosure frameworks, will equip firms to deliver on the potential of sustainable investing,” he said.
The CFA Institute is a global association of investment professionals working to advance ethics, market integrity and professional standards of practice.