European Talent Trends In The Age Of Impact investing

The explosive demand in social investments and impact investing is creating a talent shortage in the industry. To help firms better understand how to hire and retain leaders, Russell Reynolds Associates set out to analyze the talent in the European impact investment landscape, having recently partnered with the European Venture Philanthropy Association (EVPA) to collect data on the profiles and insights of 60 European impact investment professionals.1

Our findings identified several trends common to most firms:

Diversity

The impact investing sector is more gender diverse than its private equity and venture capital peers (the models most comparable to the impact investing industry). It is also notable for its geographical diversity, as global expertise and awareness is highly valuable for the widespread nature of its work.

Growing sector

As a group, leaders’ tenures in impact investing are relatively short. The CEOs and managing partners of most firms do not have previous CEO experience and only 30% have a tenure of over 10 years, indicating that the sector is still relatively young and growing. This stands in contrast to the tenures of those running private equity and venture capital firms, which tend be much greater. This suggests that there are great opportunities for expansion, as focus on the United Nations’ Sustainable Development Goals accelerate. It also demonstrates how attractive the impact investing space is for “next generation” and emerging talent.

Versatile backgrounds 

The majority of impact investment leaders have a hybrid of investment management and nonprofit backgrounds, and leaders from multiple backgrounds (not only nonprofit) are increasingly looking for opportunities where they can have positive impact. However, it should be noted that many private equity teams are also looking to add impact investing talent to their teams.

Challenges of retention and lack of HR processes

One of the biggest challenges that companies face is retaining their expert impact investment talent, particularly as larger investors look to expand their social impact investing activities. A lack of formal HR and impact measurement teams may contribute to this challenge. As this diverse and hybrid industry continues to expand, there will be more demand for talent; this may lead to a greater emphasis on incentives – both short and longer-term.

Profiles of European impact investing leaders

Senior executive profiles in the European impact investing industry is continuously evolving, and differentiated by a few characteristics:

Increase in gender diversity  

Almost 30% of the leaders in European impact investing are female, compared to 10% in the private equity and venture capital industry.²  While there has been an increase in the female talent pool (compared to traditional asset management), companies still struggle to create a gender balanced workplace.

Regional and local market knowledge

More than a third of leaders have lived on two or more continents; 58% of firms that invest in two or more continents hire senior leaders with this profile.  As investments become more global, companies are evolving to recruit investors who are local to their investments.

Growing sector

As a group, most impact investment leaders have been in their roles less than 10 years. Just 30% have held their title for a decade or more; others are nearly evenly split with 22% holding their role for five to 10 years; 32% for one to five years; and 17% for less than one year. These short tenures are a sign that the sector is still young and growing.

Variety of professional experience

The majority of leaders previously led programs or departments or spent time as investment professionals at other organizations. The remaining were formerly CEOs or C-suite executives.

Career backgrounds of impact investing leaders

Overall, the majority of impact investing leaders come from a hybrid background (a mix of nonprofit and investment management experience), with an almost equal distribution across other background categories (financial industry, private sector and nonprofit/public sector career backgrounds).

Leaders from multiple backgrounds (not only nonprofit) are increasingly looking for opportunities where they can have positive impact, so there is a tendency to hire from the financial industry and other parts of the private sector.

Pros and cons of different backgrounds include:

Companies and team structure

While the majority of firms have a formal senior management team, few organizations have a formal HR team or officer. However, several firms have a dedicated impact measurement officer.

As the majority of firms lack HR expertise (either in the form of a team or dedicated individual), retention will require more attention.

Retention and development strategies

Developing and retaining “next gen” impact investing talent will be crucial as the focus on ESG and sustainable finance continue to increase, especially among large funds and investors. Most companies (74% of our survey respondents) use work-life balance as their main retention tool; other strategies include training, coaching and career progression opportunities.

While hard to implement, more than half of our survey respondents said there is a link between personal reward and measure of impact of the firm.

In fact, impact investors have a built-in retention advantage as a result of the personal fulfillment of the job. While this alone is not sufficient (i.e., firms will still have to monitor work/life balance and employ more traditional retention strategies like training and development), firms should be doing more to connect their enterprise impact with individual actions to drive employee engagement.

However, these strategies need to be implemented through formal arrangements and structures which, as mentioned above, many organizations still lack. Indeed, half of the firms that align rewards with achieving impact measures have an impact measurement officer or team.

Final recommendations

Professional HR management

Institute professional HR management teams with a strategic focus on talent acquisition, development and retention, as they will be crucial for impact investment firms to succeed. At present, while 77% of firms have dedicated senior management teams, only 17% have a dedicated HR leader.

Impact measurement team

Establish an impact measurement team to increase the opportunity and monitoring of links between personal reward and impact delivery and increase retention.

Focus on diversity

Consider screening for geographic diversity to ensure leaders understand market needs, where these are global.

Appendix: Methodology

RRA conducted a study in 2019 to analyze the profiles and backgrounds of senior leaders in global impact investing firms. Our study found that the scarcity of senior investment talent with a portable “track record” in impact investing will make it crucial for the sector to cultivate the next generation of impact investing leadership from both the nonprofit and investing worlds. We recently partnered with the EVPA to analyze trends specific to the European landscape.

Our data is based on the profiles and insights of 60 European impact investing leaders gathered from three main sources:

Survey

Together with the EVPA, we designed a survey to collect data on the backgrounds of European impact investing leaders and organizations. The target audience of the survey mainly included Impact Funds Initiative (IFI) members of the EVPA; this was extended to the wider EVPA membership. The total sample of survey respondents included 27 members from 27 different firms. The survey built on an earlier analysis launched by the EVPA, which had started to touch upon talent backgrounds.

Additional data gathering

RRA complemented the survey results with data collection from publicly available information and RRA’s proprietary data on 33 additional impact investing leaders.

Interviews

We conducted targeted interviews to gain deeper insights into trends in the sector. Interviewees included both EVPA IFI members who responded to the survey, and impact investing leaders from RRA’s network.

Additional Authors

Vanessa Di Matteo is a member of the Knowledge team for Russell Reynolds Associates' Social Impact sector. She is based in London.