What is an ESG Analyst? Here’s What to Know

Environmental, Social, and Governance (ESG) has become an incredibly important part of the investment process for businesses and investors, which has developed a new role and specialization. A person who is tasked with using these topics to analyze an industry, product, or impact is called an ESG Analyst.

Corporations and investors alike have used ESG analysis to calculate ESG risks regarding material usage and how many opportunities for growth and profit exist in a field or financial industry.

Proper assessment allows the right amount of resources to be allocated to complete the job. 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 considered, which an analyst covers in detail. Today, we will cover ESG analysis, the type of work an analyst performs, jobs, and how to work in ESG investing.

What is an ESG Analyst?

An ESG analyst plays a crucial role in the realm of sustainable investing. ESG has become a significant aspect of modern business practices. By studying and analyzing a range of factors, the ESG analyst evaluates an entity’s performance within these three dimensions.

This ensures that informed decisions are made in the overall context of sustainability and long-term value creation. An ESG analyst’s primary responsibilities involve conducting meticulous research to assess a company’s environmental footprint, social influence, and governance structure.

From climate change to human rights and corruption, the insights provided by these professionals shed light on diverse issues, ultimately helping businesses minimize risks and enhance their sustainability.

To perform the role efficiently, they frequently examine data from both private and public sources. ESG analysts create comprehensive reports on companies, industries, or projects by meticulously compiling and analyzing this information.

These reports give stakeholders a clear understanding of various ESG aspects, fostering well-informed, socially responsible investing and environmentally conscious decision-making.

A proficient ESG analyst’s expertise contributes significantly to a business’s long-term success. Their diligence in analyzing relevant ESG factors serves to optimize profits, streamline logistics, and manage risks effectively.

See Related: ONEOK, Inc. ESG Profile (OKE): Is It Sustainable?

What Does an ESG Analyst Do?

ESG analysts collect information from the private and public domains considered ESG investing factors. This information is used to create a detailed report on a company, industry, project, or idea before a project moves forward.

The analysis covers various aspects, from social influence to environmental impact and governance. 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.

The ESG research analyst will often conduct public or private sector surveys to gather additional ESG data and information. Questionnaires or even interviews with individuals is also standard tool used. An ESG analyst will consider a company’s voting history, ESG reports, annual reports, the investee company’s CSR, and direct inquiries.

An ESG analyst often works for global private equity and investment management firms, but any industry can use their comprehensive services.

Diligent research is a fundamental task for ESG analysts, as they scrutinize data from diverse sources, such as the Dow Jones Sustainability Indices, to gauge a company’s commitment to responsible practices.

Furthermore, they actively engage with stakeholders, investment teams, and management to gather valuable insights and deepen their understanding of ongoing operations and future strategy.

They offer a way for investors, individuals, or companies to look for lucrative projects and gauge the impact of planned investment. ESG analyst jobs can be tedious, but they can be a very lucrative line of work for those with an eye for detail and a knack for unearthing hidden trends.

See Related: Investing in Carbon Credits

What Skillsets Does an ESG Analyst Need?

ESG jobs are most suited to detail-oriented, meticulous, and patient people. 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. Many online courses can help you get started, or you can enroll in a live course that offers comprehensive training.

Most companies and ESG recruiters seek an analyst with 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.

If you have experience working with an NGO, investment bank, investment professionals, consultancies, or rating agencies, chances are you will have no problem finding an entry-level position.

You must 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 cannot express the results of that research to your client, your efforts will fall flat.

Here’s a breakdown of the different skills required and

• Communication skills: Effective communication is crucial in relaying complex ESG data coherently to colleagues, stakeholders, and clients. You must be proficient in presenting your findings in written and verbal form to various audiences.
• Analytical prowess: The ability to dissect large sets of information and draw meaningful conclusions from the data is a must. It would be best if you were adept at spotting trends, identifying potential risks, and making recommendations accordingly, particularly regarding financial analysis.
• In-depth knowledge of ESG criteria: Analysts should have a comprehensive understanding of environmental, social, and governance aspects, including current best practices, benchmarks, and legal requirements.
• Technical aptitude: Familiarity with various software, databases, and technology tools (such as data analysis and visualization platforms) is crucial to process and analyze the abundant data at their disposal efficiently.
• Critical thinking: The capacity to question assumptions, challenge conventional wisdom, and develop innovative approaches to problem-solving is essential, as an ESG analyst’s role involves navigating complex issues that demand fresh perspectives.

See Related: VTEX ESG Profile (VTEX): Is It Sustainable?

A Closer Look At The Role Of An ESG Analyst

A person working as an ESG analyst conducts various analyses of environmental, social, and governance factors in different industries. However, understanding the specifics of their job can be challenging.

They use calculations to compare the performance of stocks, estimate greenhouse gas emissions, create graphs, calculate sustainability-weighted indices, and perform other tasks.

Their research is extensive and involves more than just a quick online search. To obtain the necessary information, an analyst must conduct thorough investigations and act as a detective to assist clients in making informed decisions.

In answering these questions, an investor, client, or company can choose an action that fits their needs and ideals. Let’s delve into the three high-level ESG factors an analyst will try to solve.

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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 impact that field. Different margins must be met depending on the client, company, or investor’s target to move forward or even stop a planned action.

For example, suppose someone is considering ESG investing in geothermal energy or another clean technology. In that case, the analyst will report how the specific planned investment will improve or worsen the ESG integration.

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.

See Related: History of Impact Investing: 8 Things to Know

Question #2 – Does the ESG Risk Match The Client’s 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 in 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 an analyst will unearth.

See Related: What is a Quadruple Bottom Line?

Question #3 – Are the Risks Able to be Mitigated to Better Improve The ESG Impact?

If there are many 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 analyst will likely create a report showing further ways to reduce them.

Investees, companies, and corporations interested in action often look for creative, effective ways to improve their ESG impact. You will be able to discover the options available and present them along with the rest of the assessment.

See Related: How to Measure Social Impact (Step-By-Step Guide)

Work Deliverables of a Certified ESG Analyst

An analyst’s work 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 interested in sustainability will be interested in the ESG policies of similar businesses.

Whereas, if the 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 is, they may produce as many as 90 to 150 reports yearly.

Most reports require a presentation, but for some fields, only a report will be sent to the person in charge for their perusal and evaluation. In some cases, if a board or committee makes a final decision, analysts will be called in to help the group decide on moving forward or exploring other options.

Preparing and memorizing many small facts, connections, and ESG considerations is critical. Simply presenting the report is not the end of the job, however. Suppose a company, investor, or business decides to move forward.

In that case, 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 the company’s or investor’s annual reports. In some instances, an analyst will be tasked with helping to improve the ESG integration and impact, even if the results are within an expected range.

See Related: How to Invest in Wind Energy

ESG Analyst Salary Figures

The salary figures vary significantly throughout the United States. As of 2023, the average salary for an entry-level ESG Analyst I is around $81,790.

However, the range usually spans from $68,690 as a starting point to $95,790 for more experienced individuals. Multiple factors influence these figures, such as educational background, certifications, unique skills, and years of experience in the sustainability field.

In a broader perspective, data from July 2023 indicates that an ESG Analyst’s median earnings nationally sit at $54,711 per year. The mode of payment, whether hourly, weekly, or monthly, varies based on company policies and job types.

• Estimated total compensation: $88,551 per year
• Base pay: $77,382 per year
• Additional pay (bonuses, commissions): $11,169 per year

It’s important to acknowledge that these figures are subject to change, influenced by geography, cost of living, and industry-specific salary ranges.

For instance, metropolitan areas with higher living costs generally showcase higher salaries than rural areas. Similarly, industries such as legal, aerospace & defense, and agriculture may also influence an ESG Analyst’s salary.

See Related: Vy Global Growth ESG Profile (VYGG): Is It Sustainable?

How to Become an ESG Analyst

To embark on an ESG analyst career path, one typically needs a bachelor’s degree in business, economics, or a related field. Acquiring a recognized certification, such as the Certificate in ESG Investing offered by the CFA Institute, can further enhance your competency.

Another notable qualification is the EFFAS Certified ESG Analyst (CESGA), a comprehensive program covering various ESG analysis and integration aspects. Becoming a certified ESG analyst will set you apart from your peers and enable you to start at a higher pay tier.

See Related: W. P. Carey Inc. ESG Profile (WPC): Is It Sustainable?

What Skills are Required for an ESG Analyst?

An ESG analyst needs a combination of skills, including:

• Solid understanding of sustainability and ESG concepts: Knowledge of environmental, social, and governance issues like climate change, biodiversity loss, and social inequality is crucial.
• Economic and financial analysis: Demonstrating strong quantitative and qualitative analytical skills helps them examine a company’s financial performance and potential risks.
• ESG research and reporting standards: Knowledge of reporting frameworks like GRI, SASB, and TCFD is beneficial in assessing corporate disclosures.
• Communication and presentation skills: Conveying findings to stakeholders and collaborating with different teams requires excellent verbal and written communication.

See Related: Wabash National Corporation ESG Profile (WNC): Is It Sustainable?

What are Common ESG Analyst Interview Questions?

Interviewers might ask the following questions to assess your understanding of ESG analysis:

1. How do you define ESG investing, and why is it relevant today?
2. Describe the process of conducting an ESG analysis on a company.
3. How do ESG factors impact stock prices, and how can investors use ESG analysis to make decisions?
4. Discuss an example of ESG risk that affected a company and its stock performance.
5. How do different reporting standards complicate ESG analysis, and what can be done to reconcile the differences?

See Related: Walker & Dunlop, Inc. ESG Profile (WD): Is It Sustainable?

How can I Prepare an ESG Analyst Resume?

An effective ESG analyst resume should showcase your qualifications, skills, and experience within the ESG landscape. Consider the following tips:

• Highlight your education and certifications related to ESG, sustainability, or finance.
• Emphasize relevant skills and expertise, such as financial analysis, ESG research methodologies, or familiarity with reporting standards.
• Showcase your experience in sustainable investing, ESG risk assessment, or similar roles.
• Include a section on notable achievements, such as successful ESG-related projects, contributions to industry publications, or conference presentations.
• Tailor your resume to match the job requirements and use industry-specific terms to demonstrate your knowledge.

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