Corporate finance execs seeking greater ESG knowledge

As ESG and sustainability issues continue to impact on company performance, finance professionals are seeking education and upskilling to improve their ability to manage risk and return considerations.

The impacts of COVID-19, human rights risks like modern slavery and the urgency of climate change considerations have refocused the minds of finance professionals, rising up the management chain to include CFOs. But many report challenges in knowing how to integrate ESG into measurements of risk, return and balance sheet activities.

Climate change is particularly in focus in the lead up to COP26.

"Global trends are showing that sustainability and climate are becoming a permanent part of doing business, including climate-related accounting standards and regulation and there is a growing demand in capital markets for robust and reliable climate-related financial information," said Karen McWilliams, Chartered Accountants ANZ business reform leader. "Our member survey from earlier this year found 83% of members strongly agreed or agreed that we should provide education content to support them on climate change."

CPA Australia cited similar sentiments.

"In focus groups with our members, we identified a strong demand for ESG knowledge and practical skills. Our members see ESG as important to their roles as accountants and business advisers," said Jane Rennie, general manager external affairs, CPA Australia. "Research conducted by CPA Australia indicates a majority of SMEs consider ESG factors important to their business and over 20% want assistance from their accountant in relation to ESG."

Demand for ESG credentialled professionals outstrips supply in Australia, Rennie said.

"The availability of formal pathways for developing ESG knowledge and skills is growing," Rennie said. "However, it's probably true to say that most ESG education still occurs on the job. Education providers are playing catch-up to meet the demand for ESG training.

"Over the past few years, ESG education has morphed from building awareness to a focus on skills development, as candidates are being asked to apply these skills in their day to day jobs."

The observations by the accounting professional bodies is borne out by experiences in recruitment. Stephen Moir, director of specialist finance and accounting recruitment agency Moir Group.

Moir notes that in discussions with finance professionals, including current CFOs, there is a growing realisation that the CFO is "front and centre" in discussions around risk management, strategic planning and capital planning and ESG is part of those considerations.

McWilliams reinforced that.

"Climate risk isn't just associated with information outside the financial statements but also we've seen bulletins and guidance produced from the Australian Accounting Standards Board around how climate risk needs to be considered within the financial statements themselves," McWilliams said. "This has also brought these matters very much firmly within the domain of our members and something that they are taking quite seriously."

Moir recently held a round table for CFOs and ESG was one of the key topics of conversation.

"A lot of CFOs are quite passionate about this area when they look ahead, but they don't know where to start," Moir said. "Many are seeing a lot of pressure if they work for a non-Australian MNC, and a lot of them are pressured internally. All talked about their employees are speaking up about ESG and what are we doing as a business and they're driving change as well."

ESG knowledge is "still very tightly held in Australia," Rennie said.

"In other technical areas, a senior adviser might have twenty years of relevant experience behind them," Rennie said. "Whereas in Australia, you'd probably be considered an ESG specialist with less than half that. Overseas, and especially in Europe, there's a far greater depth of ESG talent. This reflects the greater maturity of ESG awareness and responsiveness in those markets."

Senior finance professionals are asking about potential employers' strategy around managing key ESG issues, Moir said.

"We noticed a lot of people when looking to move organisations, as part of their due diligence, they are asking what is the company doing, what is the purpose around this, that kind of stuff, and if they're not getting good answers, they take that into consideration," Moir said.

The pipeline of professionals with ESG and sustainability skills is also growing, Moir added.

"I look at the number of younger people who are studying sustainability, there is a wave of people coming through uni at the moment and there is quite a momentum that is building," Moir said. "You have really seen that in the last 12 months, through COVID-19 and with the climate issues that are happening around the world, including Australia. It's only going to get more and more important."

ESG considerations are of concern across organisations, regardless of size, Rennie added.

"Traditionally a lot of what's available has been designed for the big end of town and focused on reporting and disclosure," she said. "There's a desire among SMEs to learn broader ESG skills that they can apply to their operations. CPA Australia's soon to be released ESG micro-credential is oriented towards job-ready ESG skills for accounting professionals."

Image courtesy of Amy Hirschi on Unsplash

Read more: CPA AustraliaAustralian Accounting Standards BoardChartered Accountants ANZJane RennieKaren McWilliamsMoir GroupStephen Moir