Doing the sustainability shuffle

As larger, more centralised sustainability teams continue to spring up at investment banks, one pressing question is where they are going to find the staff they need.

BNP Paribas announced this week the creation of a new 250-strong "low-carbon transition group" made up of 150 old hands and 100 new hires.

As GlobalCapital has previously reported, there is already a scramble to recruit bankers with experience handling environmental, social and governance (ESG) topics, so it seems like BNP Paribas will have its work cut out to populate the new unit.

Indeed, the French bank just lost its primary markets sustainability manager, Anjuli Pandit, to HSBC, where she will be head of sustainable bonds in EMEA and the Americas.

“This is going to be challenging,” admits Séverine Mateo, the infrastructure, energy and natural resources banker who has been chosen to lead the group from Paris. “All banks, firms, financial institutions — we are all chasing, but not for the same profile or seniority, and for us we are focused on investment bankers. So there is a huge demand, but we believe we have a good value proposal.”

And what about the 150 BNP Paribas bankers who will soon be dedicated to the new group? Does the reallocation of those resources mean that replacements will have to be found in their old departments? The bank is not ready to give the full explanation yet.

Many banks have already tried out the so-called champion model, whereby individuals within product groups become the point person for transactions labelled green, social or otherwise sustainable. Those champions, such as Barclays' Susan Barron, have been well placed to move into leadership positions in the more formal, centralised sustainability units that have been set up more recently.

The growth of ESG teams in both size and importance, sucking up talent from banks' other departments, seems to set the scene for situation in which the boring old investment bank operates alongside a parallel green bank structure. Maybe the next step will be to phase out the non-green bank entirely.

Meanwhile, it is still earnings season, and as well as their sustainable finance credentials, investment banks are touting record quarters in M&A and capital markets across the board.

Deutsche Bank may have been an outlier in terms of investment bank revenues in the third quarter of the year — strong origination and advisory fees were not enough to mute the impact of weak trading conditions in fixed income an currencies. But overall, the picture has been rosy.

How long can it last? Some bankers are starting to think the capital markets machine is running out of steam.

“I actually think that October 2021 is very much the peak,” said Daniel Rudnicki Schlumberger, EMEA head of leveraged finance at JP Morgan. “The volume of activity in our market has been nothing short of crazy, with 10 plus transactions between the leveraged loan and high yield bond market every week this month. That's not going to continue."

For some bankers, that would surely be a relief. Banks have been pulling out all the stops to try to get juniors' workloads under control this year, or at least pay them more for handling the record levels of activity. But nothing would achieve this as effectively as a modest slowdown in deal flow.