Shortage of ESG Experts Could Have Negative Effect on Canada Financial Services Firms

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Canada’s financial sector is facing a talent shortage in sustainable finance as demand for people who can evaluate ESG-related risks and opportunities far exceeds the supply, according to a new study.

Environmental, social and governance factors are becoming central to investing and lending activities, but two-thirds of firms are impacted by the dearth of relevant skills, according to a Deloitte survey that was commissioned by Toronto Finance International and the Financial Centers for Sustainability.

“I think it could potentially be a very negative impact if we don’t focus on it today,” TFI Chief Executive Officer Jennifer Reynolds said in an interview.

The study is another signal that talent shortages are hitting parts of the financial industry. Last week, the CEO of Royal Bank of Canada said banks are struggling to hire enough engineers, data scientists and artificial intelligence specialists because of competition from other sectors. U.S. banks from JPMorgan Chase & Co. to Citigroup Inc. have indicated in recent days they’re paying more — sometimes a lot more — to hire and retain the people they need.

Skills in demand include ESG risk management, qualitative and quantitative analysis and ESG auditing, according to the Deloitte survey. The shortage is felt equally across the Canadian finance landscape, including banks, insurance companies, asset managers and pension funds.

“Certainly some are ahead of others in understanding some of the issues. For example, pensions have for quite some time had larger teams focused on ESG,” said Usha Sthankiya, partner in sustainable finance and ESG at Deloitte.

Ignoring the need for ESG-focused knowledge and talent can have an effect on the company’s technical analysis, risk management, auditing and disclosure capabilities, said Reynolds. “We can’t wait on this. We’ve got to do it today.”

Photograph: Buildings stand under construction along the skyline in Toronto, Ontario, Canada, on Sunday, Feb. 16, 2020. Photo credit: Brett Gundlock/Bloomberg.