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CommentP&M Notebook

The colour of money

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It's the new must-have accessory for any self respecting capital markets firm, and it's only going up in price

As a dedicated sustainable finance or capital markets desk goes from being a flashy add-on for a leading bond house to a basic necessity, the cost of maintaining one is spiralling skywards, raising the question of whether and how they pay for themselves.

The urgency with which banks are staffing up in this area is evident in the amount of poaching going on between them, with heavy traffic also picking up between investment banks, advisory shops and rating providers.

Leonie Shreve, for example, just left ING after 18 years, most recently as global head of sustainable finance, for a new job as a partner at PwC in Amsterdam, while Credit Suisse’s global head of ESG strategy, Daniel Wild, is heading to Swiss private bank J Safra Sarasin in March.

Such moves can open the door to promotion for ambitious insiders, but they can also beget more external searches.

For the time being, ING has handed Shreve’s responsibilities to its regional head of sustainable finance in Emea, Robert Spruijt, and he is probably a good candidate to take over permanently, but the bank could also look elsewhere.

If it does, it will be competing for highly sought after skills. Other banks recruiting for green bond and sustainable finance specialists include DZ Bank and ABN Amro.

From broke to woke

Given the rapidly growing demand for what is, after all, a fairly new type of expertise, it’s no surprise to learn that the salaries commanded by ESG bankers are also on the up, although perhaps from a low baseline.

It has been suggested that the influx of sustainability experts into the capital markets from less well-paying industries outside of banking may have kept compensation in check, allowing banks to staff up in green finance inexpensively.

“There's obviously a bit of a comp gap in the space between the mainline desks and ESG,” a headhunter told GlobalCapital last year. “There's a bit of a poor cousin thing going on.”

That may not be the case for much longer, if the current trend is maintained. Tara Bagley, a partner at recruitment firm Page Executive, says compensation in green bonds and loans has risen faster than in other fields of finance.

Bankers in ESG roles who were paid base salaries of £80,000 in 2019 are now making £150,000 plus bonus, she wrote on LinkedIn.

And it’s not just ESG salaries that banks are shelling out on. They are also spending money turning ordinary ‘grey’ bankers green by sending them on expensive sustainable finance training courses at places like the London School of Economics and Cambridge.

And as the cost of doing green business rises, it raises the question of how to pay for it all.

Some see the investment in ESG services in a similar light to having the latest technology, the cost of which is also steadily creeping up at investment banks. In this view, green know-how is simply a running cost, as essential as keeping the lights on in the office.

But others think banks are not extracting enough value from their ESG advisory offerings. “We have a very good business and we need to monetise it better,” an investment banking source at UniCredit recently told GlobalCapital.

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