Responsible Investments: Why I love carpenters but wouldn't let them do surgery on me

I love carpenters. My grandfather was one. He was able to create beautiful furniture, build sturdy houses with precision, and he had a real love for craftsmanship. Unfortunately, I did not inherit his skills and talents, but I am still fascinated by what a good carpenter can accomplish.

Being a carpenter requires a steady hand, precision, knowledge of tools, and focus. At first glance, one might think that carpenters would make great surgeons as well, given the overlap in their skill sets. Still, and I presume many would agree, I would not want a carpenter to perform open-heart surgery on me. It requires different knowledge and education than that of a carpenter. Conversely, I wouldn’t let a surgeon build my house either (and I am not just referring to the size of the bill).

While we instinctively recognize that these are different professions, we often lack the same instincts when it comes to roles within responsible investment. Too often, I hear the argument that a portfolio manager can easily do the work of an engagement specialist without acknowledging the vastly different skill sets required. The expertise needed spans corporate governance, ESG strategies, board dynamics, proxy voting, filing resolutions, regulatory developments, CSRD/CSDDD, executive remuneration, and vastly different topics such as climate, biodiversity, and human rights.

The reverse plea—that an engagement specialist could take over the work of a portfolio manager—is rarely made. Why? Because we have codified the qualifications for portfolio managers in educational programs and certifications, but not for responsible investment specialists (or the wide range of professions that responsible investment now entails).

Kim Schumacher, PhD, CEnv has written extensively on this topic and describes the vast taxonomy of professions within responsible investment, the rise of competence washing, and thus one of the foundations of greenwashing. I believe the ESG skill materiality matrix in Environmental, Social, and Governance (ESG) Factors and Green Productivity: The Impacts of Greenwashing and Competence Greenwashing on Sustainable Finance and ESG Investing is a great starting point for addressing this issue.

However, more action is needed. I don’t have the final solution, but there are at least three initial steps we could take as a sector:

• Being Outspoken: The field of responsible investment is rife with the Dunning-Kruger effect, where non-experts are often more vocal than actual experts. While it may be uncomfortable at times, responsible investment professionals should be more outspoken about uninformed opinions and critically challenge colleagues and peers on this topic.
• Codifying Skill Sets: We can and should take a more active role in codifying the skills needed for specific roles, which includes collaborating with educational institutions.
• Building Bridges: Responsible investment professionals should not work in isolation but should actively reach out to colleagues in portfolio management, client advisory, and other relevant roles. This will not only create a shared understanding of sustainability but also enable meaningful connections between sustainability and investment management. In that sense, it's just like carpentry: a regular carpenter can create great things out of wood, but a great carpenter collaborates with masons, plumbers, and other professionals to jointly build a sturdy house that lasts for the ages.

I hope this is a starting point for a conversation, and would be curious to hear your views on this as well. ?