As we have been saying for months now, with President Joe Biden in the White House and Democrats controlling both chambers of Congress (even if only by a thin margin in the Senate), investors can bet that the ESG asset craze that started before Biden was even in office will now explode, as Congress prepares to dump billions of "infrastructure" spending into the sector.
In anticipation of cashing in on this trend, PwC (one of America's "Big Four" auditors who serve the Fortune 500 corporations around the world) has decided to make a major investment - $12 billion to increase the firm's head count by more than one-third over the next five years, along with investments in technology and other deals all intended to "capture a booming market for environmental, social and governance advice."
According to the FT, the new plan marks "a significant acceleration" from the firm's $7.4 billion in investment since 2016. The size of the new investment is much larger than the 20% increase the firm has seen in overall revenue since 2016.
Here's a breakdown of what the plan will entail, per the FT:
- Some 100,000 new employees will be hired, expanding the firm's workforce to 284,000, which is up 25% over the last five years already.
- $125MM for a US initiative aimed at finding 25Kjobs for students from racial and ethnic minorities over five years, including 10K within PwC. The US firm currently hires 7K-8K people a year in total.
- The firm will spend $3 billion, 25% of the total commitment, to double its AsiaPac business, which booked $6.4 billion in revenue in 12 months to June 20202.
- PwC will launch ESG-focused "trust leadership institutes" in the US and Asia to help "train clients in business ethics and the rudiments of ESG."
- PwC Global Chair Bob Moritz says the firm is "going to massively invest to redefine itself and rebrand itself to make sure we’re valuable for what our clients need and what the world needs."
- There will also be a $1 billion investment in quality control and automating audits. Ryan said that PwC planned acquisitions to improve its capabilities in areas including ESG, cloud technology and artificial intelligence.
The announcement marks the firm's "biggest strategic shift" since it bought strategy consultancy Booz & Co back in 2014. Clients are increasingly "scrutinizing the social impact of the businesses they back and its effect on their financial returns," the FT explained. In other words, PwC's announcement will likely be followed by similar publicly-touted investments in ESG-related know-how by the other Big 4 firms, not to mention other consultants like McKinsey, Bain and BCG. The first of those - McKinsey - is already struggling with a bit of a reputational problem from its role in the opioid pandemic, along with its work for foreign governments like the Saudi royal family and the CCP. They definitely can't afford to underplay it on ESG.
Already, the other Big 4 firms (Deloitte, EY and KPMG) are raising sustainability issues within longstanding practices such as in their audit and assurance business. Sources say ESG is being given "greater prominence within their businesses." EY has assigned Steve Varley, the former head of its UK business, as its first-ever global vice chair for sustainability.
Ultimately, the pressure to change is coming from regulators. As regulators in Europe and the US discuss standardizing ESG disclosures akin to the international accounting rules agreed decades ago, the firm believes that all PwC staff need "a baseline understanding" of ESG, according to US Chair Tim Ryan. By way of trimming some of the fat, Ryan said that in the US, the firm's accounting and tax reporting operations would be combined into a single business unit.
$12 billion is a big number. But PwC is a big firm, and given the ethical lapses of some of its contemporaries (let's not forget rival EY's fine work auditing Wirecard over in Germany for a decade) it's perhaps not surprising that some leftists are worried this money still won't be enough to adequately address the ESG-related needs of PwC's clients.
This announcement makes me excited & terrified— Alexandria Fisher (@EnviroDevlopmt) June 15, 2021
I'm thrilled that PwC sees a market need for ESG skills & is willing to invest
I'm scared companies will receive advice from people that just took a short ESG course & have inadequate expertise. #ClimateRisk https://t.co/BC5DkNYyhV
It's what some might call "green washing."