What does an ESG analyst do and how to become one - 300 hours (2024)

If you arelooking for financial vacancies, you will undoubtedly come across a number of roles related to the environmental, social and governance (ESG) sector, including an ESG analyst.

Not only is this becoming an increasingly popular career choice, but it isone of the most pronounced trends in the sectorlately this has the potential to impact a much wider range of careers within the financial sector.

However, you may be new to the field of ESG analysts, the unique niche sector they fill and the associated responsibilities, with questions such as:

• What are the main tasks of those working within ESG?
• Why are sustainable investments becoming industrial benchmarks?
• Why work in ESG? Can this career path provide you with a rewarding experience?

These are the questions we aim to answer in this guide to the ESG analyst role. Read on for more information!

What is an ESG analyst?

ESG is an acronym for environmental, social and governance, and broadly speaking, an ESG analyst is tasked with conducting due diligence before providing specific financial advice. However, this is just the tip of the iceberg of the activities typically performed by a person in this role.

ESG analysts will scrutinize various non-financial aspects of a particular investment opportunity to provide moreroundedconclusion to a stakeholder or a company. Some of these variables may include (but may not be limited to):

• The environmental impact of an upcoming project.
• Public opinion in relation to how a company is perceived.
• Examining the annual financial reports of each organization.
• Determining the sustainability of a potential investment project.

ESG analysts will often be employed by private equity firms, asset management organizations, banks and similar entities that offer clients potentially lucrative investment opportunities.

Essentially, an ESG research analyst's job involves delving into other aspects of an investment (particularly those related to environmental, social and regulatory issues) beforeto combinethese with relevant financial data.

These analysts then report their findings to investment specialists, senior stakeholders and (in some cases) to individual clients.

Therefore, a more informed decision can be made before taking further action regarding the action to be taken regarding the investment opportunity.

What exactly does an ESG analyst do?

Now that we have a clearer picture of the role in general, you may be wondering what that means if you want to understand what an ESG analyst does specifically.

What actions does an ESG analyst perform during a typical workday?

Now let's look at these aspects and the types of skills needed to excel.

A day in the life: the tasks of ESG analysts at a glance

First, it's important to note that, as with any finance role, the exact duties will undoubtedly vary from organization to organization.

However, most ESG analysts will spend a significant amount of time researching data related to a potential financial company. Naturally, this information includes some of the aspects mentioned in the previous section. They can also collect results such as:

• Previous revisions
• Large data source from public and private areas
• Public policy statements
• Stock quotes and analyzes from well-known sites such as Bloomberg
• Short and long term growth forecasts

This data is then used to determine whether the risk margins associated with a particular company are in line with the ESG guidelines established by the company (or investor).

An analyst can also use these results to better understand what steps can be taken to mitigate the potential risks.

What skills does an ESG analyst need?

ESG analysts will typically work as part of a team and will need to build strong relationships with their staff. This is important to be able to make a balanced analysis of an investment, taking into account ESG factors as well as factors such as risk and opportunities in purely financial terms.

In addition to providing timely reports on new opportunities, they may also be required to monitor past investments from an ESG perspective to ensure that primary fundamentals have not changed. Similarly, an ESG analyst may need to review existing investments to ensure they are compatible with the client's evolving ESG strategies.

We can now see that one of the most important skills an analyst must possess is the ability to multitask in a potentially very fluid work environment.

This means that a good ESG analyst can look at an investment from multiple perspectives and quickly adapt to changing events in the broader environment. There are additional qualities that the best often bring, including:

• The opportunity to collaborate with investment teams.
• Strong communication skills.
• Knowledge of relevant regulations (such as GDPR guidelines).
• The willingness to remain completely transparent about the results.
• Excellent quantitative skills.
• A general understanding of asset management and the financial markets.
• A solid approach to ethics.

In other words: an ESG analyst must be able to sketch a 'financial picture', both in general terms and with minor adjustments.

Environmental, social and management professionals must have the ability to objectively view investment opportunities from a sustainable, moral and transparent perspective. This goes far beyond static technical analysis and other standard tools typically used by the average investment advisor. This may involve looking at an organization's policies and strategies, including those not directly related to financial performance. everything from supply chain strategy to energy consumption and sustainability.

Will an ESG analyst have a great career?

Many of those who get involved in the investment industry are attracted to much more than just commissions and profit margins. In fact, they are often attracted to this sector because of its flexible nature. The good news is that many ESG jobs offer the best of both worlds.

Something that is crucial to mention is thatthe demand for ESG investments is increasing.

An analysis by a specialized recruitment agency in the fourth quarter of 2021 even shows thisthe need for qualified ESG specialists is expected to reach a record high, with demand for ESG roles greatest in the professional services, financial services and technology sectors.

One reason for this is the undeniable fact that companies are now under more scrutiny (in terms of sustainability, compliance and governance) than ever before. It therefore stands to reason that hiring qualified ESG analysts is an effective option at their disposal.

Another factor in this equation relates to the way organizations are perceived by both investors and the public. Individuals have become extremely interested in the role of sustainability, its long-term environmental impacts, and even how a company is perceived by its employees.

While some may call this the “softer side” of investing, the fact is that a well-rounded ESG strategy can make the difference between a successful business and a failed one. ESG analysts are here to bridge this gap.

What challenges await an ESG analyst?

Any ESG career is not without its fair share of challenges. Perhaps the most relevant stumbling block is that the concept of ESG is relatively new within the investment community.

So there is still a certain degree of uncertainty; especially from critics who have not yet understood the value of this position.

Other professional challenges involve egalitarianism. This is another way of saying that an ESG expert should be unbiased when comparing tax returns with potential compliance, environmental or even ethical issues. An ESG analyst should not only look at the potential for short- to medium-term financial gain.

This is where a handful of core personality traits come into play. These are different from the technical skills we've already discussed. Ideal candidates should be able to demonstrate:

• An eagerness to take on new challenges.
• The ability to work under pressure.
• A talent for explaining complex issues in a concise manner.
• The willingness to accept that the ESG sector is constantly evolving.

Perhaps most importantly, ESG specialists must be passionate about the financial market and the positive impact they can have by providing sustainable and informed advice. It is crucial thatRealconcerns about corporate social responsibility in the modern world.

It should also be mentioned that ESG careers are considered quite flexible. Because these skills are in high demand, there is always room for upward mobility or even the opportunity to leave a current position for the so-called "green pastures" offered by another company.

This is perhaps one of the main reasons why more and more professionals are choosing to enhance their skills using oneESG certification.

The analytical side of sustainable investing

It's a good idea to quickly clear up any misunderstanding before moving forward.

Some people are wary of the transition to the ESG sector. They tend to believe that this role will be less analytical and more focused on the moral aspects of the economy.

While this is true to some extent, it hardly paints the whole picture.

A more accurate way to think of an ESG analyst would be as a combination of a traditional asset management specialist and a corporate responsibility expert.

This is important because both companies and customers are now looking for the best of both worlds. The truth is that a large part of the analysis typically includes an ESG position.

From interpreting big data to conducting statistical evaluations and communicating those results to others, there are certainly more traditional analytical aspects to the work than meets the eye.

Salary figure for ESG analyst

What type of salary can an ESG analyst expect to earn?

Naturally, the answer to this question will be based in part on the employer, the location, the individual's experience and the exact role. There are still some useful observations that should be highlighted here.

In the UK, the average base salary for an ESG analyst based in London with up to five years of experience is £53,000 (~$71,000 at the time these figures were compiled), with a range between £35,000 – £82,000 (~$47,000 – $110,000). Please note that this may not include other benefits such as perks and commissions. The figures of some ESG experts with more than 5 years of experience are considerably higher.

Why are companies willing to pay such acceptable prices? Then the team ofMcKinseypoints out that ESG analysts can provide several benefits from a management perspective:

• Sales growth can be facilitated.
• Regulatory and legal issues can be kept to a minimum.
• ESG analysts can optimize capital investments for better long-term returns.
• Embracing such a mindset can also have a positive impact on employee productivity and happiness (the social side of ESG management).
• Sustainable approaches tend to reduce costs over time.

Companies therefore (rightly) believe that the best way to attract qualified talent is to offer attractive salaries. So what does it take to become an ESG analyst?

How do you become an ESG analyst?

There are a few considerations if you're interested in ESG analyst jobs.

These may be slightly different if you already work in the financial sector than if you have recently entered the financial sector.

What ESG qualifications are available?

There are quite a few options to choose from depending on your needs.

There are three options for those in the wider financial or asset management industry:

• Certificate in ESG Investing from the CFA Institute
• EFFAS’ Certified ESG Analyst (CESGA)-programma
• CFA UK's Certificate in Climate and Investment (CCI)

Certificate in ESG Investing from the CFA Instituteis available worldwide and requires approximately 130 hours of study. If you successfully complete the exam, you will receive a digital certificate and a badge that can be displayed. Once you pass, please note that you cannot add titles after your name for this certification.

A good alternative to that isEFFAS’ Certified ESG Analyst (CESGA®)-programma, which allows you to add 'CESGA' or 'Certified ESG Analyst' after your name when you visit. It is a diploma-level qualification – also available globally – that gives beginners an advanced understanding of ESG topics in relation to investing, with a strong focus on practical application.

Another valuable option isCFA UK's Certificate in Climate and Investment (CCI). It is also available globally, but unlike the ESG Investing Certificate it has a special focus on climate-specific considerations in investing, so in a sense it is more specialized in the arguably more urgent part of ESG investing.

If you are concerned with risk management,Certificate for sustainability and climate risk(SCR) from GARP may be interesting. The SCR qualification has a more specific focus and has been developed to help risk management professionals understand and assess the risks of climate change to organisations.

Finally, if you are a financial advisor looking to strengthen your client relationships by incorporating sustainable, responsible and impactful (SRI) investment principles into your portfolio recommendations, visitDesignation of Chartered SRI Counselor (CSRIC®).from College for Financial Planning and US SIF: The Forum for Sustainable and Responsible Investing.

When considering an ESG role, many recruiters will typically require that you have an ESG background, even if this is not absolutely necessary.

As the industry becomes more competitive, relevant professional certification is likely to become increasingly common and be an excellent way to demonstrate knowledge and understanding of ESG factors in relation to investing. Of course, the aforementioned personal and professional qualities are just as important if you want to excel.

Assuming you plan to take an ESG exam in the future, it's wise to familiarize yourself with key ESG principles and how they apply to the investing world.

Don't forget to check out our selection ofESG guides and information, as this will give you a broad overview of what to expect, help you decide which qualification is right for you and prepare for your journey.

Where possible, an internship or work in a relevant department in a company known for its transparent sense of corporate responsibility can also be an additional incentive ifpresent your resume to a potential employer.

I hope the above sheds some light on what ESG analysts do and some concrete steps to becoming one, if you're interested. What are your current career considerations? Share it with us in the comments!

In the meantime, here are some related articles that you might find interesting:

• Asset Management Outlook 2023: Four Key Trends Impacting Future Jobs
• CFA ESG certificate: our simple guide
• EFFAS' Certified ESG Analyst (CESGA): our epic guide
• Certificate in Climate and Investments (CCI): a complete guide
• GARP SCR Certificate: A Practical Beginner's Guide
• Chartered SRI Counselor (CSRIC): our helpful guide
• IMC (Investment Management Certificate): A Beginner's Guide