• The San Juan Daily Star

Business schools respond to a flood of interest in ESG

By Jenny Gross

A decade ago, the hottest Master of Business Administration courses typically covered topics such as game theory, valuing securities and negotiating mergers. Today, some of the most popular classes are about climate finance, impact investing and social entrepreneurship.

The University of Pennsylvania Wharton School of Business now offers more than 50 undergraduate and graduate courses related to social impact. The Duke University Fuqua School of Business recently added a course to its core curriculum called “Business and Common Purpose.” At Harvard Business School, 600 students took second-year elective courses related to social enterprise last year, compared with 251 in 2012.

“There’s been an explosion of interest from students,” said Todd Cort, a lecturer on sustainability at the Yale School of Management and the co-director of the school’s environment and business center.

This interest reflects an increase in jobs that require knowledge in environmental, social and governance, or ESG, topics.

Global sustainable investment topped $30 trillion in 2019 — up 68% since 2014, according to McKinsey. That has created more jobs in the field, which has pushed salaries higher for workers with the necessary skills. In addition, companies say they’re having an easier time recruiting junior employees than senior leaders in ESG roles, which could give younger workers an advantage in climbing the corporate ladder (or allow them to start at a higher rung) than for the typical jobs for MBA graduates.

Demand for workers who understand ESG will likely continue to grow, said Bethany Patten, the senior associate director of the sustainability center at MIT Sloan School of Management. In particular, she said, businesses will need to hire people to finance renewable energy projects and to disclose the risks they face from climate change, while investment firms will need analysts to evaluate exposure to climate change and make recommendations on sustainable investments.

The reshaping of business school curricula also means that students whose job titles never explicitly include ESG will enter the workforce equipped with knowledge about topics like sustainability and equality. And that could ultimately have a significant impact on how businesses are run.

Social impact skills wanted

Companies and recruiters say that filling roles in the expanding ESG sector isn’t always easy, despite the high interest among business school graduates.

Helen Pradas-Page, the head of the banking and investment sector at Acre, a sustainability recruitment firm with offices in the United States and Europe, said that about 70% of the sustainable finance roles her firm filled over the past three years were newly created roles. She added that recruiting for mid- and senior-level positions was more challenging.

That’s because the pool of people who have worked in sustainable finance for more than 10 years is relatively small, she said. “It didn’t exist in the form that it does today.”

PwC has found a similar challenge in its recruiting. The company said in June that it would create 100,000 new positions over the next five years, many of which are focused on climate change risks and sustainability.

“There are not enough people today that know about ESG challenges to meet the demand that exists,” said Richard Oldfield, PwC’s global markets leader.

Beyond ESG jobs

Regardless of the proportion of MBA graduates who end up in social impact fields, rising interest could help ESG considerations become a bigger part of business.

Over the past two years, Cort said, professors have begun incorporating sustainability lessons into the required core courses like microeconomics, accounting and corporate finance.

That’s important to students like Neha Dalal, who graduated from Stanford’s Graduate School of Business in June. Dalal said she chose to pursue an MBA because she wanted to learn how to use financial tools to solve social problems. At Stanford, she was an officer of the impact investing club, where students invested in early stage for-profit companies that aim to bring financial returns alongside social and environmental ones. The club was so popular that one-third of students in the business school’s class of 2022 applied to join last year, she said.

Dalal, who works in philanthropy at an investment management firm, said business schools have a key role to play in teaching students about sustainability and ways to improve diversity, equity and inclusion, known as DEI.

She said that if students learn how to hire in ways that minimize bias and learn to invest in ways that consider environmental and social impact, they will continue to do so throughout their careers.

Costis Maglaras, the dean of Columbia Business School, said the new focus on social impact makes sense considering that climate change will affect every part of the way businesses operate over the coming years.

“Over the last two decades if you ask yourself, ‘What is the thing that really transformed businesses?’ It’s been technology, data, analytics,” Maglaras said. “If you were to ask what will transform businesses in the future, I believe it’s going to be climate change.”

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