Institutional investors are increasingly recognising the potential for ESG (environmental, social and governance) factors – such as climate risk and poor human rights performance – to adversely impact the valuation and financial performance of the companies they invest in.

At the same time, consumer demand for responsible investments is surging, especially from the Millennial generation (Bloomberg). Regulation is emerging, particularly in the EU, and the influence of initiatives such as the UN Principles for Responsible Investment (PRI) and the Task Force on Climate-related Financial Disclosures (TCFD) continues to grow.

As a result, capital flows into ESG funds are accelerating and asset managers are under increasing pressure to integrate ESG considerations into their investment approaches.

Increasing demand & challenge in impact reporting

Investors, regulators and other stakeholders are becoming increasingly aware of the impact that investment choices have on society, and are increasingly demanding that asset managers intensify their efforts to provide insight into their level of contribution to sustainable development. This results in spectacular growth in environmental, social and governance (ESG) integrated and responsible investment products.

A growing number of asset managers have begun reporting on the impact of their holdings. This commonly includes reporting on impacts associated with their investments, including carbon emissions and jobs created. However, many asset managers have found it difficult and time-consuming to report on the full impact of their investments due to the lack of a standardised methodology and limited availability of reliable data.

ESG challenges

Yet, as the pressure grows, asset managers face multiple challenges such as:

  • a complex landscape of ESG focus areas
  • differing expectations from institutional investors
  • the likelihood of new regulation and uncertainty over its form
  • a confusing array of inconsistent ESG data
  • an absence of standard ESG terms, metrics and reporting frameworks
  • a lack of consensus on the effects of ESG strategies on financial returns

KPMG has a network of dedicated ESG asset management professionals who can help your organisation enhance its approach to ESG, whatever your current level of maturity.

How we can help

KPMG can provide bespoke ESG services to match the differing needs of asset managers at various levels of ESG maturity. Our support typically covers the following areas:

  1. Develop ESG strategy
  2. Implement ESG strategy
  3. Monitor and report on performance
  4. Review processes and assure disclosures

Find out more by downloading our ESG Asset Management brochure (PDF, 578KB).

Get in touch

The ESG Asset Management Tax team is always at hand and welcome the opportunity to discuss your asset management requirements to find the appropriate solution for you.

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