APAC financial institutions struggle with ESG skill shortage

Organisations need the right talent to navigate regulatory and reputational risks.

Financial institutions in the Asia Pacific region are facing an extra challenge in aligning their organisations to environment, social, and governance (ESG) standards: a burgeoning skill gap. 

“APAC organisations are at a critical crossroads,” Emmanuel Rondeau, visiting professor and senior advisor of MENA studies at the London Institute of Banking & Finance, said in an interview. “They have to respond to the call to action and go beyond simply being compliant – to enabling the workforce to deal with ESG demands.”

ESG has become not just a marketing issue, but a regulatory one.

“In Singapore, for example, falsification of accounts is criminal fraud and can attract up to ten years in prison and/or a fine. In addition, South Korea has plans to impose fines for misleading disclosures,” said Rondeau, who is also a member of the lead board, chairman of the risk committee for France’s La Banque Postale.

The problem is that the much-needed experts who can navigate the changing regulations and avoid reputational risks may not be available.

Almost 8 in 10 (77%) of financial professionals reported a sustainability skills shortage at their organisation, according to a report by the Toronto Finance Internation (TFI) in 2022.

With less than six years remaining before the deadline, is there still enough time to close the gap?

Rondeau says yes.

Two-year plan
To start, Rondeau recommends a two-year plan for ESG training and talent recruitment.

“Fostering in-house talent both tackles the immediate needs around ESG capabilities and feeds into strategies for long-term ESG objectives. It has the additional benefit of boosting staff satisfaction by enabling them to make a meaningful contribution to the green transition,” Rondeau said.

However, he warned that financial institutions should not lose sight of the long-term perspective.

“Put simply, a multifaceted approach should be adopted. To support finance professionals with the specialised skills required to adeptly manage ESG risks and reporting, it’s critical that firms invest in executive level training and support,” he noted.

He also suggested partnering with universities. 

“In addition, financial institutions can start to collaborate more proactively with our schools and universities to provide a greater steer on what is needed as well as develop strategies to funnel more students into the sustainability industry once they graduate,” Rondeau said.

He added that specialised programmes in sustainable finance attract a growing number of students across the globe.

Reputation
Reputation also plays a role in attracting the right people to join the organisation.

“As ESG experts look for their next opportunity, they want to be moving to a place where they are going to reap more than just financial benefits and this is an area where banks fall behind, given their historic reputation of not possessing a flexible work environment,” Rondeau said.

He advised banks to look at their reputation within the industry and ensure that their HR policies are “evolving with society and competing with more modern organisations.” 

“As a good selling point to attract ESG experts, the financial industry can easily claim that they will have the most significant impact on the transition to a greener planet, because of the driving force of sustainable finance,” he said.

Rondeau emphasized that greenwashing is now a potential fraud risk and could equate to significant sanctions.

“Board members should not be tempted to view fines for greenwashing as a cost of doing business,” Rondeau warned.

“Board members will increasingly face personal liability for their firm’s greenwashing and the legal net is broad. Financial institutions can also be implicated if clients face charges – compounding the importance of full ESG risk disclosure,” he said.