ESG is shorthand for Environmental, Social, and Governance. A person who is tasked with using these topics to analyze an industry, product, or impact is called ESG Analyst.
Corporations and investors alike have used ESG analysis as a way to calculate ESG risks in terms of material usage in addition to how many opportunities for growth and profit exist in a field.
Proper assessment allows for the right amount of resources to be allocated to get the job done. In many cases, it will also let companies or investors know if their target is actually worth pursuing.
There are important disclosures, externalities, fiduciary duties, and more that need to be taken into account, which is covered in detail by an analyst.
Today we will cover ESG analysis, the type of work an analyst performs, jobs, and how to work in ESG investing.
Table of Contents
- What Is ESG Analysis & What Does an ESG Analyst Do?
- A Closer Look At The Role Of A Environmental Social and Governance Analyst
- Question #1 – Will Investing Improve or Worsen the ESG Impact?
- Question #2 -Do the ESG Risk Match The Clients Parameters?
- Question #3 – Are the Risks Able to be Mitigated to Better Improve The ESG Impact?
- ESG Analysts Work Product
- How to Work in ESG
What Is ESG Analysis & What Does an ESG Analyst Do?
ESG analysis is the study of collected information from the private and public domains. This information is used to create a detailed report on a company, industry, project, or idea before a project moves forward.
The analysis covers a broad range of aspects from social influence, environmental impact, and of course, governance.
In essence, it is a role or task dedicated to performing due diligence. An analyst is a person who is charged with researching and analyzing the information that has been collected.
Depending on the topic of analysis, the information collected will vary. ESG Analysts will always use a combination of private information and public information.
For example, if the target is a company or investment into a company, then the research would cover market data from Bloomberg, the company’s annual reports, NGO public policy papers, government policy papers, and so on.
In many cases, the ESG Analyst will also conduct surveys of the public or in the private sector to gather additional ESG data and information.
The use of questionnaires or even interviews with individuals is also a common tool used. An ESG Analyst will consider a company’s voting history, the Dow Jones Sustainability Indices, annual reports, the investee company’s CSR, and direct inquiries.
An ESG Analyst is most often found working for private equity firms and investment management firms, but any industry can use their comprehensive services.
They offer a way for investors, individuals, or companies to look for lucrative projects and also to gauge the impact of planned investment. ESG analyst jobs can be tedious, but for those with an eye for detail and a knack for unearthing hidden trends, it can be a very lucrative line of work.
A Closer Look At The Role Of A Environmental Social and Governance Analyst
Put and an ESG analyst performs various ESG analyses in any given field. However, really understanding what does an ESG analyst does is a different story. Their calculations help them to compare stock performance, estimate greenhouse gas emissions, produce graphs, calculate sustainability weighted indices, and much more.
The research is always comprehensive and covers much more than can be found with a few internet searches. An ESG analyst will have to pound the pavement, in essence, become a detective to get the answers they need to help their clients make an informed decision.
Regarding what work does an ESG analyst perform, their body of research will seek to answer three main questions. In answering these questions, an investor, client, or company will be able to choose an action that fits their needs and ideals. Let’s delve into the three main questions an ESG analyst covers while fulfilling their role.
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Question #1 – Will Investing Improve or Worsen the ESG Impact?
Investing in a company or even starting a new one will have an impact in that particular field. Depending on the client, company, or investor’s target, there will be different margins that need to be met to move forward or even stop a planned action.
For example, if someone is considering ESG investing in geothermal energy or another form of clean technology, an ESG analyst will present a report on how the specific planned investment will improve or worsen the ESG.
The same goes for any field, not only environmental. Most will choose to move forward if there is a neutral or positive impact, while only a small number will move forward when a negative impact but high profits are reported.
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Question #2 -Do the ESG Risk Match The Clients Parameters?
Every client, company, or investor will have a set amount of risk they are willing to take. Some may have a high threshold and be more open to taking the long shot, while others may prefer to stick with safer choices.
Those who have a limited amount of time or money to invest will likely stick to the safer bets, while those who are more financially able to be selective will have the ability to be more adventurous.
Money is not the only factor when it comes to risks. Social and environmental responsibility also plays a role when it comes to risk assessment.
With cancel culture at an all-time high and those looking to back morally and socially responsible projects, the ROI is no longer the most important factor that an ESG analyst will unearth.
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Question #3 – Are the Risks Able to be Mitigated to Better Improve The ESG Impact?
If there is a high number of risks, the next line of research will be to discover if there is a way to mitigate those risks.
Even if there are only a small number, an ESG analyst will likely also create a report that shows ways to reduce them further. Investees, companies, and corporations who are interested in action will often look for creative but effective ways to improve their ESG impact.
An ESG analyst will be able to discover the various options available and present them along with the rest of the assessment.
See Related: How to Measure Social Impact (Step-By-Step Guide)
ESG Analysts Work Product
The work an analyst does will always be research-based; however, the ESG research context will vary depending on the company, client, and industry.
For example, an ESG Analyst who works for a company that is interested in sustainability will be interested in ESG policies of other similar businesses.
Whereas, if the ESG Analyst is working for a company focused on market research, their reports may be focused on analyzing surveys and interacting with people to get more feedback. This will help create ESG rating models for their clients.
Reams of paperwork and hours of research go into an ESG analysis. Not surprisingly, the research results are provided in the form of a written and sometimes verbal report.
Depending on how busy an ESG Analyst happens to be, they may end up producing as much as 90 to 150 reports a year.
Most reports do require a presentation, but for some fields, only a report will be sent to the person in charge for their own perusal and evaluation.
In some cases, if there is a board or committee that will make a final decision, the ESG Analysts will be called in to help the group decide on moving forward or exploring other options.
As an ESG Analyst, the ability to be prepared and memorize a myriad of small facts, connections, and ESG considerations is critical.
Simply presenting the report is not the end of the job, however. If a company, investor, or business decides to move forward, an ESG Analyst will typically be requested to monitor the situation for the first year or two to spot and help mitigate any ESG issues that may be encountered.
They are also asked to report on performance and make regular reports that will be added to annual reports of the company or investor. In some instances, an ESG Analyst will be tasked with helping to improve the ESG impact even if the results are within an expected range.
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How to Work in ESG
If you like what you have read so far and you are interested in the field, you may be wondering how to work in ESG or become more skilled.
ESG analyst jobs are abundant; however, most people prefer to work with seasoned professionals.
ESG jobs are most suited to people who are extremely detail-oriented, highly meticulous, and very patient. The job is not at all glamorous, but it is rewarding in addition to being lucrative.
Before looking for ESG analyst jobs, it is important to obtain the right training to help you become efficient and successful in the field. There are many courses online that can help you get started, or you can enroll in a live course that offers comprehensive training.
Most companies and ESG recruiters are looking for an analyst that have at least three years of experience. It is hard to get experience if no one is interested in fresh hires.
The best way to get experience is by completing an internship or becoming an ESG analyst with your current company while employed in a related position. The competition for experienced analyst positions is very tough, but many clients are open to hiring those with complementary backgrounds.
You will need to have some sustainability experience, such as working in environmental research, risk policy, CSR, or climate change.
Communication skills are critical as well. Researching every detail and preparing an immaculate report is important.
Still, if you are unable to express the results of that research to your client, your efforts will end up falling flat.
ESG jobs vary depending on the field you prefer to target. A typical day will entail you looking through each part of your client’s investment or business prospect to help them find risks and possible ESG interactions.
The bulk of your time will be spent going over data and speaking to various sources to confirm or gather more information.
The information gathered will help guide the decision-making process. While this may seem straightforward, many different approaches can be applied. The approaches will depend on the analyst work style, the risks and opportunities parameters, and the client’s goals.
The smaller bulk of an ESG analyst’s time will be spent on presentation prior to the final decision and supporting the client by answering questions posed individually or as a group.
You will also need to give input regarding sustainable objectives, exercise ESG due diligence, and even work to follow trends and developments in each sector.
Technological literacy is an important part of being an ESG analyst, as you will need to work with some of the most advanced systems in the market to serve your clients effectively.
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