Nordic Certified ESG* Analysts #3 – Danske Bank solidifying their Pole Position in front of Nordea, Nordic Credit Rating going all CESGA and Norway still lagging!

Lacking real ESG competence is an important problem the finance industry is facing in an environment being harder regulated and where expectations from the asset owners (clients) and other stakeholders are increasing fast. The potential cost, through regulatory and reputational risk, and other negative stakeholder related impacts from not being able to deal with this correctly, can be quite high.

There are many high level ESG relevant courses you can pick up, and they will take ESG beginners to a more informed level. But we also need formal ESG analyst education in asset management and capital markets, we need professionals that can produce full ESG research reports on investee companies based on a thorough ESG risk understanding, not only simplified and shallow top-down tick off box process (we see too much of this out there today).

A problem is that a lot of practitioners with ESG education are doing other things than portfolio management. To be able to fully integrate ESG risks in investment decisions that is now mandatory in the EU, formal training and education is required. Then it does not help to have an ESG person in sales, reporting, compliance or other.

To address this, portfolio managers and investment analysts, need to add ESG to their formal educational base, preferably with certification from an international recognised organisation.

At sustainAX we have had a closer look at where in the Nordics and in what companies we find Certified ESG Analysts (EFFAS). It is the only education of ESG analysts for finance professionals we have found so far requiring a case to be satisfactory solved during the examination to gain the certification and hence the most relevant for assessing individual knowledge of ESG relevant for investing.

One word on the fact the ESG risk assessment must rely on science. This is paramount, but this does not mean that the ESG risk analyst must have a PhD in nature or social areas. ESG risk analysts can read, and it is normal to rely on science consensus. So, dismissing the value of an ESG analyst without a degree in nature or social sciences is something we do not agree to. We see it as important that the ESG analysts understand the link to financial risk.

We will here present to you what we found among the 275 CESGAs in the Nordics registered on the EFFAS website.

Nordic Certified ESG Analysts overall

Since we did this exercise last time in August last year, not less than 51 new CESGA have appeared in the Nordics. The CESGA is gaining in popularity and the cohorts trying to succeed the exam each quarter is increasing steadily. It is great to see ESG analyst competence spreading around the Nordics.

Certified ESG Analysts per country

On a geographical level Sweden has the most CESGA (130) as last time, but Finland (70) and Denmark (52) were ahead relative to the population size, but this is no longer the case with Denmark lagging. Sweden (130) has taken the largest leap since the last review adding not less than 38 new, solidifying its top position on the Nordic list. Norway (19) is still lagging, and it is surprising to see that this is still not really picking up. The difference to Finland and Denmark is striking and to be at the level of the others, we would expect to see Norway over 50. One explanation can be the lagged implementation of the SFDR Level 1 and EU Taxonomy regulation earlier this year. It will be interesting to see if the number of Norwegian CESGAs will accelerate. This regulation requires important process changes for asset managers, particularly for ESG risk integration in investment decisions and it is urgent to get this formal specific competence in place among portfolio managers and analysts.

We have added the Baltic countries as many Nordic banks have staff there.

Certified ESG Analysts per company

Considering this on a company level, Danske Bank CESGAs represent not less than 24% of all CESGA in the Nordics (64 of 264 in total where we could identify the company) ahead of a strong number two, Nordea (39). The new surprise this time is Nordic Credit Rating with 4% (11) of all with an increase of 10 CESGAs. The increase is 8 new for Danske Bank, solidifying their strong number one position in the Nordic CESGA list. Relative to their staff size, Nordic Credit Rating, Ålandsbanken, Fondita and sustainAX also sticks out with not less than respectively 11, 9, 4 and 4 CESGAs. New on the list with a minimum of 2 CESGAs are Alfred Berg, Akademiker Pension, NEFCO, EY and Nordanö. They are all part of a group that seem to have understood the importance of bringing up the ESG analyst competence. A key differentiator here is whether the ESG focus is on reporting or investment process. We at sustainAX recommend focusing first on increasing the competence in the investment processes and let the reporting follow naturally.

In the following table we have all Nordic companies with 2 or more CESGAs, we have the full list available.

In the above, we have merged Robur and Swedbank. The total numbers do not match the country numbers as we did not manage to map all persons to a company. Change of company by a CESGA will impact the company’s total number.

We did not reach out to the CFA Institute to get data on the Nordic holders of the «Certificate in ESG Investing» (only multiple-choice examination, no individual case solution required) this time, as they did not answer to our request for information the two last times. If anybody out there can provide us with this information on a Nordic level, we would be happy to complete this overview.

In this research we are ignoring the programs not targeting specifically ESG research and/or that we consider too expensive compared to the ~1200€ cost of the CESGA.

Here is an interesting article describing the CESGA (also comparing it to the CFA Certificate in Investing): https://300hours.com/cesga-certified-esg-analyst/

Conclusion – ESG Competence Gap

Well done to Danske Bank, that has really taken the challenge to increase ESG competence seriously, and is still leading comfortably for the total number and still keeping the momentum up! Nordea is a good number 2 on the list and together the two banks are in their own league. A special mention to Nordic Credit Rating also that has CESGAed the whole team! For our Norwegian fellows, we would strongly recommend picking up the challenge now.

To close the competence gap on ESG research and ESG risk integration, asset managers need formally educated ESG Analysts. We recommend all portfolio managers and investment analysts that plan to work in this industry going forward to sign up and start studying. Make sure you choose an appropriate education; specific for investment decisions, recognised and international to ensure common understanding and preferably leading to a certification.

Of course, a CESGA is the starting point, only by practicing ESG research, ESG risk integration and related, the knowledge and skills will strengthen and become powerful.

We can help you with the ESG research processes and ESG Risk Integration processes and it will be much easier if your portfolio managers and analysts have a higher level of ESG competence as they will be better positioned to understand ESG research and ESG risks in our discussions.

Let us know what you have done or plan to do to increase ESG competence in your financial company! Maybe you have chosen another way?

*Environmental, Social and Governance factors