Lack of regulation and a talent gap holding back Scotland’s ESG investment sector
SCOTLAND is missing an opportunity to become a leader in the rapidly growing field of ethical investment due to an unprepared workforce and a lack of clarity around regulation.
That is the view of two key figures within the country’s financial sector, Betsy Williamson, Managing Director of specialist recruiters Core-Asset Consulting and Jamie Mariani, Portfolio Manager with Trillium Asset Management, leaders in socially responsible investment (SRI).
SRI is an investing strategy that aims to generate positive social change, while excluding investments that are seen to be harmful to the planet, or that have a negative impact on society.
It’s an area of financial services that has grown exponentially in recent years, with the number of job listings for ESG (environmental social governance) analysts in Scotland increasing by 70% over the last two years – reflective of soaring global demand for ethically-driven investment.
Speaking ahead of publication of Core-Asset’s eighth annual “Industry Trends and Salary Guide” report – which features environmental and social governance throughout – Betsy, said: “ESG and SRI have gone from being fringe topics to front and centre in everyday life.
Nearly every big business has an ESG strategy and the major investment firms are advertising SRI portfolios across mainstream media.Betsy Williamson Managing Director, Core-Asset Consulting
“Yet there is a shortage of candidates coming through to meet the demand for ESG-related roles. We need academic institutions in Scotland to catch up with trends. Those in and around the sector must be encouraged to up-skill.”
Regulation around SRI has struggled to keep pace with the growth of the industry. FCA-regulated asset managers, including life insurers and pension providers, have been required since 1 January to disclose how they take climate-related issues into account when managing investments. They also need to disclose how they will meet the recommendations of the Taskforce on Climate-related Financial Disclosures Act and publish disclosures on the climate-related attributes of their products.
Despite this, attempts to better define SRI has faltered, with the delays in the last two years to introducing the EU Sustainable Finance Disclosure Regulation (SFDR) which aims to make the sustainability profile of funds more comparable and better understood by end-investors.
Jamie Mariani works with Trillium Asset Management, which launched in the US in 1982 and established its UK offices in Edinburgh in 2021. Its entire business is centred around portfolios that seek to meet the financial expectations of its clients, while also delivering a positive impact.
He said: “I believe the Scottish Government could play a more active role in helping to frame definitions and standards specifically for those working Scotland.
“Such a framework would not need to carry legal force but could be a set of principles that investors sign up to and uphold. Institutional investors and individual investors need help to separate the wheat from the chaff and this could help them in making more informed decisions.
One of the biggest issues we have is how business is defining ESG - or what ethical investing actually means. It can have so many flavours or takes. This opaqueness – without a doubt – opens the door to greenwashing.Jamie Mariani CFA Portfolio Manager, Trillium Asset Management
“I think a lot of asset managers would be quite frightened of providing greater disclosure – they might be talking an ESG game but in practice when you look at what they are doing in their own organisation they are not walking the walk.”
The upcoming Salary Guide suggests fund managers can play a key role in fighting back against the practice of greenwashing – the term used when false claims are made about the sustainability credentials of an investment.
Due to launch next week, the sought-after guide is a combination of market intelligence, salary data, and insights and analysis from expert consultants and designed to assist clients in setting competitive remuneration levels, as well as helping candidates assess their career path and inform their next move.
It is the only guide of its type dedicated to firms and employers working in Scotland.
Based in Edinburgh, Core-Asset Consulting was formed in 2005 and is now a £14m business employing 22 people working across the entire financial and professional services sector.
Initially the firm carved its reputation in Scotland’s globally-renowned asset management sector. However, the success of its model allowed it to expand across the wider financial services market and it now boasts dedicated accounting, investment operations and finance teams, and also works in Scotland’s thriving legal sector.