ESG in the U.S. is not a novel idea. In the 1600s and 1700s, religious groups such as the Quakers and the Methodists recommended certain guidelines to their followers regarding the types of activities that were appropriate for investing. And one of the first ESG-oriented investment funds, the Pioneer Fund (now Amundi Pioneer Fund), was launched nearly 100 years ago, in 1928, with an objective to “do good while seeking to do well.”
Since then, growth in shareholder activism, widespread consideration for environmental factors, and corporate scandals like Enron (2001) and WorldCom (2002) have pushed ESG into the mainstream. And in 2006, the establishment at the New York Stock Exchange of the United Nations Principles for Responsible Investment, which called for consideration of ESG factors in investment decisions, laid the foundation for the current thesis behind ESG: that long-term sustainable returns depend on stable and well-governed social, environmental, and economic systems (also commonly referred to as the Triple Bottom Line).
Although the policies around ESG itself are constantly evolving, the following three paths allowing you to pursue engaging and impactful ESG-related careers should be constant for years to come.
In 2015, United Nations member countries unanimously agreed to work toward achieving 17 aspirational goals. Several of these goals—including zero hunger, good health and wellbeing, quality education, clean water and sanitation, affordable and clean energy, sustainable cities and communities, and climate action—are associated with basic needs and services that call for innovation in robotics, infrastructure, autonomous and electric vehicles, vaccines and immunology, pollution control, and sustainable farming.
For example, developing renewable energy sources, retrofitting buildings to become more energy-efficient, adopting more sustainable transportation, engineering drought-resilient crops, and protecting coastlines from the rise in sea level all require significant engineering and scientific prowess to solve. And so, STEM students and professionals with engineering and science backgrounds of all kinds are needed to solve some of the world’s most essential, pressing problems.
As ESG continues to go mainstream, corporations increasingly seek assistance from outside management consultants. Companies often employ consultants to develop in-house programs to facilitate ESG-related disclosures to the regulatory and investment communities, and to create proper internal ESG documentation and procedures. Consultants can also be instrumental in helping corporations create their ESG-stories, especially when it comes to communicating the value-add to their shareholders. In addition, many consulting firms have specific practice areas devoted to ESG, giving consultants the ability to work toward solving a variety of environmental and social problems facing businesses worldwide.
3. Investment Management
As an increasing number of institutional and retail investors seek to fulfill their ESG mandates, the need is increasing for proper due diligence of ESG-based funds, which come in several flavors—socially responsible investing, thematic investing, green investing, impact investing, blue investing, and faith-based investing. Several of these funds charge a premium for being ESG-oriented, but there’s been a lot of debate about whether or not these funds actually offer superior risk-adjusted returns. Also, some of the ESG-oriented funds have been accused of “greenwashing”—creating a façade of being environmentally responsible.
In any case, for those aspiring to work at the intersection of investment finance and ESG, the investment management industry offers a rather unique opportunity to apply traditional financial analysis skills in conducting due diligence on investments driven by the objective of “do good while seeking to do well.”
Recipient of the Presidential Award from The White House, Vibhu Sinha is an intrapreneurial and bottom-line driven senior management professional with experience in leadership roles across banking and capital markets. He has advised institutional clients on corporate strategy, idea generation and pitching, financial planning and analysis, M&A, investor relations, and ESG. Vibhu developed his acumen in Behavioral Psychology at Harvard University as part of a master's degree program. He also earned an M.B.A. from UCLA Anderson.