Morning Coffee: The niche banking job that lost its appeal but might be coming back again. How to forecast the effect of AI on your job

It’s been a strange few years for ESG specialists in investment banking.  As recently as 2021 it was one of the hottest recruitment segments, with $500k roles going unfilled.  Any banker who had driven past a wind turbine on the way to the airport, or walked past a casino while a Pride event was taking place was reinventing him or herself as an ESG expert, to the extent that the regulators had to put out formal warnings against “competencewashing”.

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And then the backlash started.  It began with a few scandals, which had the effect of taking some of the ethical sheen off the sector.  A lot of bankers were happy to giggle at this, since ESG specialists had gained something of a reputation for being holier-than-thou and judgey.  Then people began to realise that being identified with progressive causes can make you enemies as well as friends; Citi’s once-dominant muni bond franchise was partly a casualty of the State of Texas’ decision not to have anything to do with banks that wouldn’t serve the gun industry.  Today there are even “anti-ESG” investors, using standard activist techniques to attack management teams perceived as having gone too woke.  After the recent Presidential election, it might be thought that only a very brave banker, or one who wasn’t reading the newspapers, would think about taking their career in the ESG direction.

But on the other hand … some people are still making good money out of ESG.  Like Ramzi Issa, formerly of UBS and Credit Suisse, who has just set up a private credit fund dedicated to “debt for nature swaps”.  Or the Deutsche Bank and SocGen teams working on “significant risk transfer” securitisations, where the ESG label has turned out to be an excellent selling point for otherwise tricky and unpopular regulatory capital transactions.  You just need to know where the advantages are.

In the case of ESG, there are two big plus points.  The first is that to a large extent, it’s a category that’s defined by regulation.  And while markets fluctuate and industry fashions come and go, regulations are generally much slower to change.  So a regulatory niche is always a good place to occupy, if it’s not too crowded.

Secondly, and related to the first, a lot of the regulation which creates the ESG niche is specifically European.  Although the European capital market is much smaller than the American one, it’s plenty big enough to support a career for someone who is familiar with all of the EU’s funny little ways, and its investors’ specific needs.

In many ways, the backlash against ESG might be quite good for ESG bankers, if it discourages too much market entry.  Particularly so if it stops the US bulge bracket from trying to muscle in on one of the few areas where they’re not already dominant.  The conventional wisdom is that in banking you should always try to “skate to where the puck is going to be”.  But sometimes it’s just as sensible to skate toward a quiet patch of ice and wait for the game to catch up with you.

Elsewhere, if you want to know how technological change will affect careers on Wall Street, a useful forecasting principle in the past has always been “consider what might suck the most for junior bankers, and then presume that”. As Bill Cohan points out, for example, the main impact of smartphones has been a boon for “Senior bankers on Wall Street trying to abuse junior bankers on Wall Street.”

He also notes that “Wall Street isn’t a very innovative place”; most of the time, rather than reorganising itself to adapt to new tech, it just tries to automate and produce more of the same stuff it’s been cranking out anyway.  So if you follow the “whatever sucks the most” principle, what might be more painful than producing endless minor revisions to spreadsheet models and slide decks?  How about endlessly having to proofread and factcheck revisions to AI-produced pitches?  It has that sickening air of inevitability about it. 

Meanwhile …

There’s always someone worse off than yourself, and for most bankers today, that poor soul is probably located in the former star market of Shanghai.  Not only are most staff heading into their third bonus season with zeroes more likely than not, but their business travel has been curtailed, revenue prospects are as bad as they ever were and there’s an increasing risk of criminal investigation.  You can’t even count on being given permission to resign. (Bloomberg)

Size drives success in fund management these days, which means that having a very big domestic market is an advantage that’s hard to stand against.  American players have been gaining market share in all global markets, and are likely to continue to do so. (FT)

More departures at Alantra, many of which appear to have been concentrated in the UK offices.  It seems that this is not so much a matter of cost-cutting, as of senior MDs disagreeing with the new direction of the business model toward sectoral teams based out of regional hubs, and away from national offices serving mid-market clients locally. In other words, growing pains. (Financial News)

Traditionally, Wall Street was the only place to go if you were a liberal arts major with an appetite for hard work, no lust for fame but ambitions to earn six figure salaries.  These days, it’s possible to make as much as $400,000 by ghostwriting books for reality television stars. (WSJ)

In a world of pod shops, it might be better to stand out from the crowd as an old-fashioned high-rolling risk taking global macro manager.  Chris Rokos was one of the founders of Brevan Howard, but as that firm has gone institutional, he’s continued to make big bets, largely based on his personal opinions, and he’s done well out of it. (Business Insider)

“When finance tramples on people, fuels inequalities, and distances itself from the life of territories, it betrays its purpose”.  The Pope weighs in on the ESG debate. (Catholic News)

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