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Sustainability and Finance: How Ireland meets the industry’s emerging skills need

Rigorous new sustainability reporting rules are coming into force in the EU, and they’ll demand more from business

In July 2023, the European Commission adopted the European Sustainability Reporting Standards (ESRS), that all companies subject to the Corporate Sustainability Reporting Directive (CSRD) must adhere to. CSRD takes effect in 2025 and it will apply to EU and non-EU companies with revenues of more than €50 million, along with smaller companies in some sectors.
 

The role of regulations in green finance

Other disclosure and sustainability-focused regulations are on the way. At the end of April 2024, the EU Parliament voted to approve the Corporate Sustainability Directive on Due Diligence (CSDDD). From 2027, this legislation will compel large companies of over 5,000 people and global turnover of €1.5 billion to carry out human rights and environmental due diligence across their operations and value chains. In subsequent years, the new rules will gradually apply to a broader range of companies

The regulations aim to create standards for making information available to investors, to help them understand the sustainability impact of the companies they invest in. 

“What the regulation has done is create a demand or a requirement for legal and regulatory type skills to know what information to disclose, in what format and to whom. So there is a substantial extra burden,” says Eoin Fahy, head of responsible investing with KBI Global Investors, part of the French asset management company Amundi Group, whose 70-strong Irish operation supports clients and investments around the world.


Businesses choose Ireland for sustainable finance capabilities

As this space evolves, a growing cluster of companies with expertise in sustainable finance activities have located global roles and capabilities in Ireland. KBI Global Investors has been active in the sustainability space for more than 20 years, when it launched its first dedicated sustainable equity portfolios. Today, it invests more than €8 billion in water, clean energy, sustainable infrastructure and circular economy companies. 
 
TD Securities, a Canadian financial services provider, is a core advisor in the Euro ESG market and it has built its underwriting activity across three key sectors: green, social and sustainable. Its Irish arm, TD Global Finance, has issued €79 billion in ESG debt. It advises clients and helps to raise cost-effective funding for projects such as hospitals, housing, schools, and care for the elderly.
 
The company has seen its Irish presence ramp up rapidly in the past three years, from 50 to 200 people. “We have been super impressed by the quality of people we have on the ground in Dublin. Where there are positions available and the hiring manager is agnostic as to where they sit, we’re finding some really strong candidates in Dublin,” says Laura Quinn, head of primary markets at TD Global Finance.

Irish Life Investment Managers (ILIM) set up a dedicated responsible investment team of ESG specialists. It partnered with Ireland’s Sustainable Finance Skillnet to develop the first industry-focused framework for responsible investing. It was also the first company in Ireland to convert its range of flagship funds to meet SFDR requirements. ILIM’s owner Great West Lifeco, based its VP for global sustainable investments in Dublin. 

This is the backdrop for many businesses that now need to begin adopting sustainable finance practices, says Deirdre Timmons, PwC Ireland’s Sustainable Finance Lead. “For the financial services sector, regulations such as the Sustainable Finance Disclosure Regulation, the EU Taxonomy, and the Corporate Sustainable Disclosure Regulation are requiring those businesses to disclose their financing activities, their policies and procedures around those activities and their plans and targets for the future.”


Green finance skills challenge in sustainability reporting 

These reporting requirements are challenging for organisations. The green finance field calls for new skills in areas such as developing metrics, understanding sustainability frameworks, and risk assessment. “Firstly it usually requires upskilling across the organisation before any projects can begin. Once they begin to work through the requirements, it often requires a revision to, or update of, their strategies and their business processes,” Timmons says. 

“The main issue at present is data collection as this is traditionally non-financial information that is not typically collected by organisations. In addition, the requirement for assurance means that the data needs to be collected in a timely and robust manner,” she says.

For the financial services sector, there are three material differences from a reporting perspective compared to before, adds Fidelma Clarke, a partner in EY’s financial services business risk consulting practice. These are data control processes for non-financial reporting controls; external ESG data such as ESG ratings of their clients and investors. “Financial services firms need to select which ones best suit their needs and then combine these external data with their own internal data sources, she says. 

The third factor is the need to validate data integrity of external, non-financial data,
across financial services firms’ supply chain to meet new reporting standards. This is “a substantial lift for all firms,” Clarke adds. Add the fact that the regulatory landscape is still evolving and “this can be challenging for firms that operate in multiple jurisdictions and have to meet differing law, rules, regulations and reporting standards which are not aligned.”


Sustainability reporting in action 

AIB, Ireland’s largest financial services provider, has a central team with expertise in sustainability transformation and reporting to support the group’s activities across key operational areas, says Mary Whitelaw, chief strategy and sustainability officer at AIB. 

“The group function works hand in glove with the business areas to support our customers on their sustainability journey as part of the transition to net zero. We also continue to monitor market developments to ensure our skills and approach remains relevant and has an appropriate level of dynamism considering the evolving ESG agenda,” she says. 


How sustainability drives strategic direction

AIB has reported on sustainability since 2017 and has updated its progress since, which Whitelaw says is a core part of the group’s corporate strategy. In 2020, it was the first Irish bank to issue a green bond for €1 billion. Two years later, it signed an agreement to source energy generated from two solar farms in county Wexford, ensuring a certifiable sustainable energy supply at a fixed price for 15 years. 

The bank is also seeing a growing appetite in the market for sustainable projects and climate investments. “In 2023, new green lending of €3.7 billion accounted for 30% of total new lending last year whilst our green mortgage products represented 45% of new mortgage lending. Our aim is that 70% or our new lending will be green or transition by 2030,” Whitelaw says. Since 2019, AIB has provided €11.6 billion in new green lending to customers, which surpassed the bank’s own target of €10 billion by December 2023. 


Adapting to a new finance environment

As growing numbers of global financial institutions report on their environmental, social and governance (ESG), they’re having to adapt the ways they measure and track this activity. Spurred by this increase, in April 2024, EY’s Irish operation launched a new Sustainable Finance Innovation Hub in Dublin. 

As a sign of how the ESG space is growing, the firm expects the hub to expand. “The EY Sustainable Finance practice in Dublin is projecting double-digit growth over the next twelve months as it ramps up to meet growing client demand for reporting support as non-financial reporting on ESG is being brought on a par, through time, with financial reporting standards,” says EY’s Fidelma Clarke. 
 

In 2020, Skillnet Ireland, the national talent development agency, developed a learning network specifically aimed at sustainable finance. The following year, it provided funding for a project to develop open-source practical tools for implementing sustainable finance data systems and evolving taxonomy frameworks into business operating models. 
 

The project will map multi-jurisdictional regulations, reporting standards and green taxonomies including the United Nations Sustainable Development Goals and the Sustainability Accounting Standards Board, into a single view. First Derivative pioneered this initiative in partnership with the Irish regulatory technology company Corlytics. First Derivative Technologies set up a presence in Ireland in 2010 and in 2019 the company designated this site as its EU headquarters where it has a team of 120 people.  


Irish fund industry adapts with rapid upskilling

KBIGI’s Eoin Fahy has been impressed with the speed that Ireland moved to develop programmes to ensure people working in the financial services sector have the necessary skills to work with the upcoming regulations.

More than 90% of KBIGI’s staff have taken the sustainable finance training funded by Skillnet.

“That ranges from an introduction to sustainable finance – to be aware of basic concepts – right up to very advanced training for people who live and breathe this every day,” says Fahy.
 
He is aware of universities and other specialist skills providers that have also developed several bespoke training courses for sustainable finance, to help meet the industry’s need ahead of the arrival of new regulations. “This is an example of public policy on training and retraining working very well. I think it’s been incredibly positive. The need to integrate ESG into the investment process, and the skills required, are relatively new. You can’t really go out and recruit from a pool of thousands of graduates for this.”
 


Industry groups contribute to skills development

Industry groups like Chartered Accountants Ireland are also moving to meet the skills demand. In March 2024, the institute unveiled two new qualifications: a Diploma in Sustainability Reporting and a Diploma in Auditing and Assuring Sustainability Reporting. 
 
It’s a space where Ireland has an opportunity to carve out a significant advantage in helping organisations to comply with the evolving regulatory and reporting requirements. Colin Ryan, EY Ireland Financial Services Country Lead, says that the specialist hires for the firm “will see our Dublin hub become a globally significant centre for innovation in the area of sustainable financial services”.


Ireland’s compelling case for leading on green finance

Ireland’s regulator, the Central Bank of Ireland (CBI), is well respected in the European financial system, due to Ireland’s position as one of the largest global funds centres with €3.9 trillion in worldwide investment fund assets; that’s 6% of the world’s total. Ireland has already emerged as a leader in ESG investments in Europe, with 31% of all assets under management. 

Investors that might be considering locating sustainable finance operations in Ireland might already be dealing with the Irish regulator. The CBI oversees more than 10,000 financial services providers operating in Ireland, and the country is already home to 21 of the top 25 global banks and nine of the top 10 investment banks. 
 
Laura Quinn of TD Securities believes Ireland has a strong case to lead on sustainable finance. “Europe is leading the charge on this and if we’re able to provide better guidance and support on how non-European organisations can comply with European regulations, we’re in a unique position because of the multinationals we already have in Ireland. It’s an opportunity for us to lead the way.” 


Business and sustainability: benefits beyond compliance 

Deirdre Timmons of PwC says there are other benefits to implementing sustainable finance practices beyond the need to comply with regulations. “It’s not all negative. We have found when organisations start into this work that it can present opportunities either to create a competitive advantage in some area or other, or even that the employees of the organisation begin to see how their work can align with their values, something which is highly valued in the workforce of today.”

Ireland is aligning with where the market is increasingly moving. Sustainable funds performed better than traditional equity funds in 2023, research from Morgan Stanley found. According to Pat Lardner, CEO of the Irish Funds Industry Association, sustainable funds are growing rapidly and ESG products now make up 31% of all assets under management. The group represents more than 145 members servicing or managing over 14,000 funds. 

Rounding out the picture, the Irish Government’s Funds Sector 2030 Review shows a commitment to enhance the funds and asset management sector’s ability to meet the needs of global investors. 

The combination of a supportive environment, skills availability and existing activity looks set to make Ireland even more attractive as a location for inward investment and a platform for international ESG investment. 

 

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