Q&A: Acre on the growing demand for ESG and impact talent

As generalist funds build centralised teams and specialist GPs look to scale, certain professionals will be highly sought after, says Acre's Ian Povey-Hall.

What is the current state of the recruitment market for private equity ESG and impact professionals?

Ian Povey-Hall

The market is currently very dynamic due to a variety of factors, such as investment opportunities, regulatory pressure and client demand. Market participants are at different stages of implementation and integration when it comes to sustainability, ESG and impact, which means there are different demands in terms of resourcing. Across the board, we are seeing the growth of centralised teams to support generalist firms’ transition to an ESG-compliant and sustainability-driven proposition.

This centralised function is shifting from being more regulatory and client-driven to a strategic and value-creation role, working much more closely with, and sometimes embedded in, investment teams. Sustainability is being seen by more investors as a driver of outperformance, as opposed to just a prerequisite of a firm’s regulatory and societal licence to operate. We are also seeing a growing requirement for high-quality investment and distribution talent that can help sustainable and impact specialist GPs scale.

What compensation trends do you see in this area?

We are seeing a clear and steady increase in compensation across the board. This is being driven by the increase in demand and a lack of supply, as well as the strategic value placed on the ESG and impact function by some private equity funds. This increase in compensation is in relation to salary, annual discretionary awards and carry for senior roles. A few years ago, including carry for a head of ESG, sustainability or impact was the exception, but now it is much more standard.

How do you expect talent demand and supply to evolve in 2022?

Strong demand in centralised sustainability and ESG teams will continue, with the larger firms building out at a more junior to mid-level to drive integration and deliver reporting on existing portfolios.

I expect to see an increase in demand for a new role type, in the form of professionals who can create value for investors through improving the sustainability credentials of portfolio companies’ operating model. These improvements can be achieved at an operating level and by advising on origination targets through their analysis of the capacity of these companies to internalise negative externalities that will have to be priced into exit valuations.

Growth in specialist funds/GPs will continue to crowd in a wider set of skills and experience, with talent that can drive value creation through in-depth knowledge of sustainability themes such as decarbonisation, the circular economy, natural capital solutions and biodiversity, and applying that to forward-looking investment strategies and portfolio management.

How are private markets firms thinking about diversity when recruiting sustainability professionals?

Increasing ethnic and gender diversity in senior management teams has been a focus for some time and we have seen significant progress from a number of firms in this regard. Increasing socio-economic diversity is a much harder challenge and needs to be tackled from the ground up, primarily at entry level to the market. We provide the option for clients to track the diversity, equity and inclusion statistics for each search we deliver so they can develop their understanding of the candidate universe from that perspective.

Ian Povey-Hall is executive director and global head of sustainable finance and impact investing at recruitment firm Acre