Sustainable Finance will fund the transition to a sustainable future. To get there, financial institutions need to integrate environmental, social and governance (ESG) considerations into their strategy and business decisions. For many, this comes with challenges but also opportunities.
On the one hand, financial institutions must adapt their investment, lending or underwriting strategies, risk management processes and reporting on non-financial matters. On the other hand, financial institutions stand to benefit from the growing demand for ESG-focused investment products as well as financing and insurance solutions that support their clients’ transition to a more sustainable economic system.
We help you align your business to the expectations of regulators, investors and clients and achieve long-term success with an uncompromising commitment to excellence in your core business.
Our services span ESG Risk Management, ESG Business Integration, Non-Financial Reporting and Disclosures as well as Sustainability Assurance.
Work with KPMG to enhance your reputation, improve risk management and differentiate your business.
Let’s uncover the opportunities of Sustainable Finance together!
Major trends in Sustainable Finance
What are the common challenges facing financial institutions in connection with ESG?
- Complexity of the regulatory landscape: The regulatory ESG landscape has been significantly changing over the past 5 years. Requirements are scattered across various legal documents, are fast-changing and must be systematically monitored and impact assessed.
- Prioritization & governance: On the management level and within the overall organization there is a lack of knowledge of ESG, related trends and market developments. Financial institutions need to prioritize ESG-related topics and assign responsibilities within the governance framework.
- Sustainability reporting system: Financial institutions need to ensure robust process integration; this requires specific know-how for a redefinition of business processes, potentially including the implementation of new accounting systems and expansion of internal control systems with respect to non-financial information.
- Sustainability risks assessment: Current risk models do not always adequately consider sustainability risks and therefore need to be enhanced. Apart from finding the expertise, finding the right data is also critical and only parts of it are available in the market (e.g. data providers cover the likelihood of natural disasters at a certain location, but to calculate the exposure this information needs to be enhanced by geolocation data).
- Data sources & rating mechanisms: Financial institutions need to find the right data providers that deliver the information necessary to cover their investment portfolio. Financial institutions often need multiple data providers and subsequently also need to combine the data-points of these data providers as well as to combine them with internal ESG data (e.g. on diversity).
- Consistent front-to-back integration: ESG considerations impact on almost all processes, tools and functions throughout the value chain of a financial institution which needs to consistently implement and execute the (often non-binary) ESG considerations front-to-back (e.g. across the Front, Middle Office, Back Office, etc.)
Key questions for senior management
To be ready to seize the opportunities from the sustainability transition, leaders should ask themselves several important questions:
- Have we identified the major opportunities and risks for our institution relating to sustainable finance?
- Do we have the necessary experience and skills in our organization to deliver our ESG goals?
- Have we established clear ownership and accountability for ESG within the organization?
- Are we clear on our ESG ambitions and are those aligned with our strategy?
- Do we understand the impact of relevant ESG-related non-financial disclosure requirements on our institution?
- What level of confidence do we have in the design and operation of the processes and controls relating to the preparation of non-financial information?
- Do we have the necessary reporting in place to steer the business towards its ESG goals and satisfy the transparency needs of investors, regulators and senior management?
Head Legal & Compliance
- Do we understand the impact of the relevant ESG-related regulations on our institution?
- Do we have visibility of material greenwashing risks within our institutions and how they are being addressed?
- Do we understand our institution’s exposure to climate risk and other ESG risks?
- Are our ESG ambitions aligned with our risk appetite and covered in our risk management approach to risk reporting?
ESG Regulatory Essentials
This is a regular publication by KPMG providing key updates on the latest ESG regulatory developments impacting financial institutions in Switzerland, EU and the UK on a bi-monthly basis.
ESG Health Check
Financial institutions are facing growing regulatory and societal expectations relating to the consideration of environmental, social and governance (ESG) topics within their business. Coupled with the increasing awareness of the financial risks of ESG-issues, these developments are putting “sustainability” at the top of the agenda for financial service providers worldwide.
While numerous initiatives have been launched by both industry associations and regulators, the current standards and practices are far from comprehensive or consistent on ESG matters, which partially accounts for the diverse approaches and strongly varying degrees of implementation across the industry, both in Switzerland and abroad.
This ESG Health Check provides you with a high-level assessment of your company’s degree of maturity in implementing ESG considerations.
The survey covers a range of key topics from governance to reporting for both your internal setup as well as with regard to your investment and / or funding activities, for each of which you will be asked to select the general statement that best describes your organization.
The completion of the questionnaire should take approximately 10 minutes.
How we can help you
KPMG offers services across:
- ESG in banking: As banks and their customers consider future allocations of capital, ESG issues are likely to be increasingly at the forefront of their considerations. We are working with regional and global banks to build ESG rules and structures that support their public net zero commitments, help fulfil regulatory expectations and assist in achieving a just transition for their stakeholders.
- ESG in asset management: Growth in sustainable investment is accelerating. This brings a suite of challenges for asset managers, as ESG considerations should be factored into investment strategy, reporting, assurance, risk and due diligence and tax.
- ESG in insurance: Insurers are key players in the transition to a greener economy. Our experts have local and global experience with insurers worldwide and understand the broader ESG ecosystem. We offer ESG solutions across product development, underwriting, reinsurance, asset management, distribution, claims management, climate modelling, data and technology, risk management and people and culture.
- ESG Technologies: Our services include ESG assessment and professional support in developing an ESG strategy for your company, utilizing sustainable technical solutions such as decentralized ledger and blockchain technologies. Implementing these innovative technologies not only ensures ESG compliance, which is crucial not only for business partners but also enhances your reputation and gains the trust of stakeholders. Another advantage is the potential for cost savings through the adoption of sustainable and efficient technologies that can reduce your operational expenses in the long term.
Banks, insurance companies and asset managers need to understand the unique role they play in financing businesses and the economy. Together, we can give your organization a competitive edge.
- Build trust with your stakeholders through meaningful, authentic and reliable sustainability reporting
- Manage climate and other sustainability risks to protect the value of your portfolios
- Understand the positive and negative impacts of your investment, financing or underwriting decisions
- Ensure regulatory compliance and meet the expectations of regulators, investors and clients
- Establish appropriate governance structures and control frameworks to ensure reliability of information disclosed
- Access technology solutions to improve data reliability
Contact our ESG experts
A sustainable future affects us all. Keep up with the rapid pace of change.
We stand out with our bespoke services, working with you shoulder-to-shoulder in a tailored manner, combining deep industry expertise with ESG knowledge and drawing on our international expert networks.
Contact our experts if you have questions or would like to discuss industry trends.