Closing the widening green skills gap in the financial services sector

In order to harness the UK financial services sector’s full potential to facilitate the transition to a net zero and nature positive economy, the sector must first pass the so-called ‘Carney Test’.

The Carney Test, coined by former Bank of England governor Mark Carney, states that “every professional financial decision will need to take climate change into account”. To effectively mainstream climate (and nature) though, financial professionals – from junior to senior-executive levels – must develop their knowledge, expertise, and understanding of sustainability.

Concerningly, PwC’s latest analysis of job vacancy data suggests a growing industry skills gap. It finds that the total number of green job vacancies has increased from 4,900 jobs (0.26 per cent) in 2019/2020 to 16,700 (2.2 per cent) in 2022/23. In addition, PwC estimates that graduates with sustainability skills will only be able to fill 900 of these vacancies.

The shortage of sustainability-related skills begs the question: does the UK financial sector have the capacity and capabilities to interpret climate transition plans, act as responsible stewards of capital, and mobilise capital towards the low-carbon and nature positive economy?

With 80% of the 2030 workforce already in the workforce today, upskilling in the financial services sector is essential to close this widening gap. To achieve this, industry, professional bodies, and Government must all play their part.

Industry good practice must be replicated through peer-to-peer learning

A recent survey of the financial services sector found that only 8 percent believe their organisation is highly prepared for the future requirements in green and sustainable finance.

The process of producing climate transition plans will surely help firms to prepare. One of the sub-elements of the Transition Plan Taskforce’s (TPT) Final Disclosure Framework, for example, is skills, competencies, and training. Under the TPT’s guidance, firms should identify potential gaps across the organisation – including relevant Board members and executive management – and set out plans to develop the required skills.

There are already plenty of examples of industry best practice which FIs should look to learn from. Lloyds Banking Group, for example, has partnered with the Cambridge Institute for Sustainability Leadership to provide green upskilling for its employees. By the end of 2022, all 60,000 staff had completed a sustainability foundation level training programme covering the Group’s net zero ambition and strategy. In addition, more tailored and in-depth programmes have been developed for specialists on sector-specific matters, such as the impacts of the transition on the agricultural sector, as well as for the Responsible Business Committee and Group Executive Committee.

Professional bodies must work with industry to design high-quality courses 

Since its creation in 2019, the Sustainable Education Finance Charter – a group of global financial chartered and professional bodies – has begun to integrate green and sustainable finance principles into the education and training programmes of finance professionals worldwide. In addition, professional bodies like Chartered Banker now offer certificates in subjects such as Green and Sustainable Finance, and Climate Risk.

As new training programmes continue to be developed, it is key that professional bodies work together with industry to design and promote high-quality courses. Courses must be: practice-informed, offering academic background whilst developing the understanding of the link between sustainability and various roles and functions; accessible, so that it is easy to find the right courses and not too time intensive to complete them; and, to an extent, standardised to ensure quality and avoid so-called ‘competence washing’.

Clear regulatory signals from Government are vital

Upskilling takes time and requires investment in resources and training. The Government should support businesses to upskill by providing greater clarity on sustainability regulation and issuing guidance on the types of sustainable skills financial firms will need to acquire.

There is currently considerable uncertainty around the timing and delivery of sustainability regulations, such as the UK Green Taxonomy. Whilst the Government has committed to delivering a taxonomy, we are still awaiting the consultation (originally expected in autumn 2023). By providing a clearer timeline on when the Government expects to consult and implement the taxonomy, and when reporting will be made mandatory, businesses will have sufficient lead-time to properly invest, resource, and upskill their regulatory, compliance, and governance teams.

Financial institutions, professional bodies, and the Government all have important and distinct roles to play to ensure that the financial services sector is equipped with the right skills at the right level. However, this skills transformation cannot happen in a vacuum. With significant exposures in the housing, agriculture, energy, and transportation sectors, financial institutions can only achieve their own net zero commitments if skills development is carried out at pace across the whole of the real economy.