How ESG Is Changing the Asset Management Field

• The Nuveen Equities and Fixed Income group manages more than 1 trillion USD in assets, and much of the money is invested in properties that have a social impact dimension.
• Nuveen is diversifying its workforce by working with inner-city schools and hiring graduates who hold PhDs in nonbusiness subjects.
• To turn out graduates who are prepared for the changing field of asset management, says Nuveen’s William T. Huffman, business schools must design courses that introduce students to a wide range of interdisciplinary perspectives.

 
Across all sectors in the modern economy, companies are being shaped by environmental, social, and governance (ESG) concerns. Issues such as diversity and societal impact are causing companies to change their approaches to hiring employees, designing their products, and running their operations.

One field that has been deeply impacted by changing cultural expectations is asset management. As clients express more interest in products and causes that have positive impacts on the world, asset management firms are investing in new kinds of financial instruments and hiring employees who have new ways of thinking.

These were among the insights shared by William T. Huffman, who led the Firestarter discussion at AACSB’s Innovation Committee meeting in April. Huffman is president of Nuveen Asset Management, part of the Nuveen Equities and Fixed Income group. In that role, he helps manage more than 1 trillion USD in assets across equities, taxable fixed income, municipal bonds, private capital, and green lending. He also serves as an executive sponsor of the Nuveen Culture and Inclusion Council, which incorporates the best practices of diversity and equity across the firm; and the Achieve Business Resource Group, which helps women at the company attain personal and professional success.

Vineyards and Rhinos

Huffman started off by observing that, when he began his career more than 30 years ago, investors were only interested in the fixed income market, the equity market, and other profitable options. But today, while clients still primarily are interested in making money, they also want to know how companies are implementing diversity and inclusion initiatives, engaging employees, and addressing ESG issues.

In response, Nuveen has developed its own ESG framework that its analysts use when evaluating everything from municipal bonds to equity products. If Nuveen is considering municipal bonds, for instance, it might assess the danger of wildfires and other climate risks. When an organization is incorporating ESG considerations into its operations, said Huffman, “we think that will add share price value over time and that the company will grow.”

In a related development, more clients also are interested in investing for long-term societal impact—a concept that is not new, Huffman said, but that has gained momentum in the past five or 10 years. As part of its commitment to positive societal impact, Nuveen now invests in opportunities such as vineyards, roads, and commercial property assessed clean energy (C-PACE) loans. In fact the company recently created a video showcasing how its investments are designed to provide individuals with lifetime incomes, help first-generation students attend college, launch businesses that don’t create carbon footprints, and “make an enduring impact on our world.”

While today’s clients primarily are interested in making money, they also want to know how companies are implementing diversity and inclusion initiatives, engaging employees, and addressing ESG issues.

In addition, Nuveen is the lead investor in the Wildlife Conservation Bond issued last year by the World Bank with funding from the Global Environment Facility. The bond supports the protection of critically endangered black rhinos in the Addo Elephant National Park and the Great Fish River Nature Reserve, both in South Africa.

Years ago, Huffman said, he never could have imagined that Nuveen would invest in something known as “rhino bonds,” but he expects this type of investment to increase at a rapid pace. “We have to keep learning and teaching and looking for different sources of income and sources of growth.”

New Questions, New Recruits

It’s not just clients who are interested in Nuveen’s ESG efforts, Huffman said; employees are, too. When Nuveen recruits new hires, interviewees ask how the company promotes work-life balance, engages with staff members, and develops managers. Even new college graduates “are interested in the social aspects of the company and what we’re doing outside of the company,” he said.

While potential recruits are asking new questions of the firm, the firm is looking for new kinds of employees, particularly those who bring nonbusiness perspectives to the field. “We’re thinking, where can we go to find people with different ways of thinking?” Huffman asked. “Do we have to go to schools [where] we normally wouldn’t recruit?”

One step the company has taken to recruit more widely has been to bring inner-city students into the Nuveen offices to show them “they could have a place in this industry.” Another tactic has been to hire people who do not have business backgrounds, but are interested in research—for instance, graduates with PhDs in Japanese studies or religious studies. Two such hires have been with the company more than 15 years and are “some of our best employees today,” said Huffman.

Subjects and Degrees

Nonbusiness thinkers bring fresh perspectives to the table—but even business-minded individuals can develop new mindsets if they’re exposed to a broad array of subject matter. For that reason, Huffman stressed, it’s essential for business schools to offer interdisciplinary learning opportunities. These opportunities also help students develop the critical thinking and interpersonal skills that are so essential in the workplace today.

Huffman noted that while his background in finance and accounting have enabled him to do his job, other skills he has acquired through experience have taught him to think differently and propelled him through his career. He emphasized that “having that diversity of curriculum is important.”

When business schools offer interdisciplinary learning opportunities, students develop the critical thinking and interpersonal skills that are so essential in the workplace.

In a related topic, a member of the audience asked whether companies will continue to value business degrees as indicators of skill or whether they will begin relying more heavily on other credentials and experiences. Huffman said that his degrees, as well as his CPA and CFA designations, did help him secure some opportunities, but they were just “door openers.”

He added, “Those door openers may change over time if businesses like ours start recruiting from different schools.”

The Flex of the Future

Whether new hires have traditional or unconventional backgrounds, employees will be particularly valuable if they have excellent soft skills—which are even more important in hybrid work environments where workers are only in the office a few days a week. While Huffman recognizes that some companies don’t like the flex environment, he expects it to become even more widely adopted in the future. “The world’s moving that way, and we have to be out in front of it,” he said.

An audience member observed that one of the chief reasons bosses give for wanting employees to return to the office is that in-person interactions spark more creativity. Huffman replied that, during the pandemic, employees quickly learned how to connect over Zoom, mastering the ability to be innovative and collaborative “no matter where they were sitting.” Yet he believes that in-person meetings remain essential because they promote deeper connections among employees.

His own company has yet to determine how many days a week employees should be in the office. “We’re still playing around with it,” he said, “but that interaction is key.”

Complex and Changing

In summary, Huffman noted that the investment field is very complicated today due to the combination of social impact investing, diversity and inclusion initiatives, and ESG issues. He said that the question for deans then becomes, “How are you going to help students prepare for that kind of environment?”

Admitting he did not have the answers, he suggested that management educators think about offering different kinds of curricula and learning experiences to prepare students for the quickly evolving field of asset management.

“It’s a great industry,” he said. “It’s fun, it’s exciting, but it’s changing faster and faster and faster.”