Asset Management & ESG

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.

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.

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.

Our Asset Management practitioners offer the following core services to Asset Management firms;

• ESG Gap Analysis; Many asset managers want to know where they stand. Our gap analysis looks at this through several different lenses, including; a full firm review and analysis, external analysis, peer analysis, risk identification and register. 
• SFDR Advisory; SFDR advisory focuses on the commercial application of SFDR.  Looking beyond the regulatory requirements, our practitioners focus on; ESG readiness, house/fund level strategy, product governance, product launch and commercial peer analysis.
• ESG Regulation Advisory; Regulation can quickly overwhelm a global investment management firm based on domicile and distribution in multiple jurisdictions.  The team at KPMG looks at regulation through; advising on policy, methodology, supervisory mechanisms, a regulatory register for investment managers and their investors and disclosure analysis. 
• ESG Strategy & Integration; it is not by happenstance that asset managers develop measured ESG strategies and policy.  Our team is uniquely situated to advise on policy design and implementation, marketing material integration, ESG data due diligence, ESG implementation and optimisation.  In addition, the firm offers Compliance by Design that enhances the process and procedures of fund management. 
• ESG Reporting; Undertaking a comprehensive ESG program is only half the battle.  Communicating the outcomes and evolution of an investment fund requires effective communication.  Our team advises on reporting process and oversight, SFDR periodic reporting, annual firm CSR/ESG reporting and ESG factsheets. 
• ESG Assurance; Confidence in the marketplace is key to building investor trust.  Our team can assist asset managers in KPMG led workshops for external stakeholders, agreed upon procedure (AUP) private reports and external assurance opinions. 
• ESG Training; More often than not there is a skills gap at a number of seniority levels within an asset management organisation.  Our team has conducted a number of training programs for fund boards, c-suite executives, investment teams, risk/internal audit professionals and internal staff. 

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

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.