Activity in the ESG consultancy space is ramping up – with acquisitions accelerating and firms creating specialist sustainability consultancy teams – as corporates pursue expert help to raise their ESG credentials.
Analysis carried out by independent research business Verdantix for the report Green Quadrant: ESG & Sustainability Consulting 2022, showed there were 13 takeovers in the ESG consultancy space in 2021 – this compares to just four in 2020 and only one in 2019.
The main drivers, the research firm said, have larger consultancies snapping up smaller firms and/or rival businesses to ensure they can access sustainability-focused digital technology and also bolster their in-house sustainability expertise and further enhance their credibility.
Verdantix research director, Kim Knickle, said: “Consultancies that serve the ESG and sustainability space are adapting as larger firms bolt on smaller specialists and invest in innovative technologies to help meet client demand.”
She also noted private equity firms have “noticed the growing demand for these services” and also actively pursuing acquisitions in the space flagging KKR’s acquisition of ERM for $1.7bn.
The vast demand for ESG has also seen an increase in partnerships across consultancy firms, the research indicated, as another way for sustainable consulting services to access the “granular sustainability data and sophisticated software” needed.
Specialist teams
Meanwhile, consultancies are also looking at offering specialised ESG expertise with EY recently launching EY Carbon, a service to help companies plan for net zero by 2023. For the project, the firm said it will has received £100m in investment to recruit over 1,300 professionals over the next three years.
Alison Kay, EY’s managing partner for client service, commented: “Investors, employees and communities are increasingly holding businesses to account over their sustainability credentials, and inaction is simply not an option. Businesses that will thrive in a net-zero economy must lead on this agenda with transparency and pace.”
In the UK, EY will have a team of 250 sustainability professionals aiding clients navigate the consumer, regulatory and political environment across transmission, distribution and retail energy.
Furthermore, ESG Clarity in the US has reported Mastercard is expanding its consulting services to include ESG.
“Consumers are more socially and environmentally conscious of the products and brands they interact with than ever before,” an announcement said. “Mastercard’s consultants are helping clients better understand what that means for their businesses, and then transform these insights into actionable strategies that bridge purpose and profit.”
As an example, the company cited work alongside a Latin American bank to help provide funding to restore forests via its Priceless Planet Coalition, “while also driving card usage.”
Skills gap
Further indicating the demand for ESG expertise, ESG Clarity also recently covered the hunt by asset managers for ESG investment professionals has led to a significant increase in salaries amid a battle for talent in responsible investing.
Salaries have increased as the number of candidates with the right ESG and sustainability skills does not match up to the number needed to meet increasing demand for these professionals. A new role for an ESG specialist might bring in twice as much as the pay for a longstanding, equivalent role, according to Tom Strelczak, founder of independent search firm TWS.
“In the past, it wasn’t seen as something that was worth paying for.
“But now those that have been sat doing ESG in some capacity for the last 10 to 15 years and never moved, have realised they are probably worth double in the market what they used to be,” said Strelczak.
