ESG in Internal Audit and Risk Management
29th Sep 2023
What is ESG?
ESG stands for Environment, Social and Governance and is a framework used to assess how companies perform in each of these areas.
How does it fit into audit and risk management?
In the context of external audit, professional services firms provide ESG assurance on disclosures, ensuring that they are accurate and reliable. This also applies to due diligence teams for mergers and acquisitions.
In the context of Internal Audit (3rd line), ESG related audits are varied and will involve evaluating how well a company is managing its environment, social and governance risks. This might include, for example, climate change, community relations or board structure. They may also audit how companies adhere to regulations, gather and verify ESG data and metrics and evaluate how well the organisation engages with stakeholders on ESG matters. Internal audit also plays a role in ensuring the accuracy of integrating ESG information into financial reporting. Continuous improvements in ESG practices will be identified.
In 2nd line risk management, integration of ESG helps organisations anticipate and address emerging risks relating to sustainability. Risks are identified, monitored and integrated into risk frameworks and scenario analysis may be conducted to assess the potential impact of different ESG-related events or trends.
In the 1st line, individuals in the day-to-day operations need to be aware of ESG-related risks e.g., how they incorporate sustainable and ethical practices into the running of the business. In the 1st line, consideration of ESG risks relating to supplier and vendor management and customer and stakeholder engagement is crucial.
Are there regulations that individuals working in these areas need to be aware of?
It’s important to stay updated on evolving regulations and industry best practices to effectively work in internal audit and risk management in this area. The regulations are in place to help investors, consumers and other stakeholders evaluate non-financial performance and to encourage companies to develop more responsible approaches to business.
Emerging regulations and standards we have been asked to look out for experience of in recent roles have included TCFD, CRSD, ESRS, ISSB, SFDR, Taxonomy Regulations, SEC Climate Rule, PRA SS3/19, GRI, SASB, WEF IBC and UN Principles for Responsible Investment but there are many others!
What qualifications are required?
A relevant degree can provide a strong foundation and professional certifications such as CA and CIA can be beneficial. There are also various ESG-specific certifications. Work experience and understanding of regulations and frameworks are equally important though.
Who is recruiting in ESG?
A wide range of companies across various industries will be increasingly recruiting professionals in this area. W&A have recruited roles in financial institutions, where ESG is factored into risk assessments and investment decisions. There are also likely to be roles in professional services accounting firms, to help clients navigate ESG-related challenges. It is likely that most sectors will need to recruit in this area.
What types of roles might you find in audit and risk?
An ESG Auditor will be responsible for assessing the reliability of ESG data and disclosures including compliance with regulations. A Risk Manager will focus on risk assessment. ESG Consultants provide advisory services to companies seeking to improve their ESG practices and reporting. Beyond audit and risk there are many other specialist roles in this area - feel free to get in touch regarding roles in ESG in wider accountancy and finance teams.
How do I get into ESG audit and risk?
You will need a combination of education, skills and experience and then to network accordingly.
There are a number of educational courses that you can take, but knowledge of relevant regulations is also important. The landscape is constantly evolving, so stay current with change and emerging best practices.
Analytical skills are also key, as is an ability to interpret ESG data.
When interviewing in this area, it is important to showcase your genuine interest in ESG topics.
It’s a growing field, so the number of roles will increase in time, but its also very competitive. You should be open to roles that perhaps expose you to some ESG, while perhaps not 100% ESG audit or risk. This should help you carve out a more niche career in this field in time.
Will the number of roles increase in this area?
The demand for roles in ESG audit and risk is expected to increase in future due to regulatory pressures, stakeholder concerns and investor expectations. Evolving reporting standards require professionals who can understand and navigate these frameworks effectively.
Keep in touch with your W&A consultant on live roles and what the future pipeline of roles is looking like.
What can I do to my CV to help search for these roles?
You should prepare a tailored CV for each job application to highlight your relevant skills, knowledge and experience rated to ESG. If you already have some experience in the field, you should highlight ESG-related achievements, such as ESG audits conducted, sustainability reports prepared, risk assessments performed and any specific improvements that you introduced.
You should also think about analytical skills (e.g., data analysis software such as Excel, Tableau) and soft skills (communication, stakeholder engagement). You can also highlight any familiarity with ESG reporting frameworks and standards and how you can apply these.
W&A can also help you with tailoring your CV on a role-by-role basis.
How do I get through an interview in this area?
Your W&A consultant will guide you through a tailored interview preparation session for each interview as well as a full debrief after.
As well as all the usual interview preparation you should think about demonstrating a strong understanding of ESG principles and be prepared to discuss how these are relevant to the organisation/industry that you are interviewing in. Show that you are proactive in staying up to date with the latest knowledge.
You will need to research the company’s values and ESG initiatives and explain how you can align with these.
Soft skills are always important in competency-based interviews and ESG professionals will need strong communication, teamwork and stakeholder engagement skills. Use the STAR (Situation, Task, Action, Result) method to structure responses.
There is a potential that you may be asked to do a case study or technical exercise in how you would apply knowledge to risk and control frameworks/audit.
Remember, this is a competitive field, so demonstrating your passion for sustainability and making a positive impact through ESG practices, as well as motivation for working in this specific business and field will be key.
Please contact our Internal Audit and Risk recruitment specialist Andrea Green if you are interested in either keeping in touch about ESG audit and risk roles, or if you are hiring in this area and would like some market insight.
andrea@wilkinsonandassociates.co.uk
0131 225 8030