Investors have long used environmental, social and governance investing as a technique for finding high quality corporate managers, but companies have yet to do the same when looking at their own staff. As companies grapple with challenges from the coronavirus to climate change inequality, finding future leaders capable of managing and reorienting their business is going to be more crucial, said Clarke Murphy, CEO at recruiting firm Russell Reynolds Associates.
Sustainable leaders aren’t just people with an innate desire to do good, but often ones who “woke up” to ESG issues over the course of their career, Murphy said. They also saw the economic benefit of focusing on solving those problems.
“There is a mindset, and then there is a skillset,” he said. His recruiting firm worked with the United Nations Global Compact to come up with the top traits of leaders at companies that are performing well on sustainability metrics (such as Unilever and Hilton Hotels).
Those traits include leaders who are multi-level systems thinkers, actively able to include stakeholders in their decisions, have a long-term mindset and courage to challenge traditional approaches.
Companies that identify sustainable leaders sooner, and give them opportunities to lead, should be able to hit sustainability goals more quickly, Murphy said. They will also be more successful in the current tumult, and ultimately make themselves more attractive to long-term investors.
“The factors that make strong sustainability leaders also make them able to pivot,” said Megan Starr, global head of impact at private equity firm The Carlyle Group.
“Management teams that focus on where the world is going as opposed to where it has been, and leaders who think expansively about the different ways they have to drive business performance, also deliver the best financial performance.”
Sustainable Finance In Brief
- Investors are sticking with ESG even during the pandemic recession. It hasn’t seen any decline in interest, BlackRock CEO Larry Fink said this week. ESG ETFs have witnessed $25.5 billion in net inflows year-to-date, according to data compiled by Bloomberg, and Canadian investors are stampeding into the funds like never before.
- Daimler AG plans to enter the green bond market as part of its electric car push.
- Socially responsible investment managers are committing to invest against racism.
- Goldman Sachs sees a $16 trillion opening in the market for renewables.