• Paul Henninger, Partner |
3 min read

ESG is non-negotiable.  What might once have been in the category of ‘nice to have’ previously, is now top of the board agenda across financial services firms.  Increasingly, ESG is being embedded into firms’ systems, processes, strategy, and informs decision making across the board.  When done well, it becomes part of an organisation’s culture and DNA and this is reflected in conversations I’m having with C-suite leaders who are taking an active step in pursuing change.

But let’s not pretend it’s easy.  Pressure from regulators, counterparties and stakeholders is increasing, but significant challenges remain. When ESG encompasses any activities unrelated to revenue, it can sometimes be difficult to pinpoint a starting point. The first challenge that firms need to address and grapple with is data. A recent study with more than 100 banks, insurers and wealth and asset management companies found they regarded the lack of available relevant data as the single greatest challenge preventing them from adequately addressing climate risk.

Data and analytics are critical components to any ESG assessment and form part of the metrics that now reflect an organisation’s performance. By 2025, UK banks and insurers will be required by the Prudential Regulation Authority (PRA) to provide financial disclosers relating to climate risk. So, with outdated data sets across multiple systems, investment in new analytics frameworks and technology, alongside new data sources, will be crucial in leveraging and delivering new, scalable insight and supporting growth with ESG at the core.

To progress the ESG data conversation, KPMG have collaborated with Google Cloud to develop a report that looks at today’s ESG landscape and dive into some of the data challenges that businesses face. Within this, we look at why financial service firms desperately need more ESG data, where they currently lack the data and analysis they crave, and how they might begin to close some of these gaps.

A good starting point is to look at existing systems and processes. Legacy systems and records that are out of date are already driving remedial actions.  Inconsistency, a lack of standardisation, self-assessed disclosure and patchy coverage are all big issues when gathering and comparing data.  As we dig deeper into these problems, we gain a better understanding of the problems and we start to create a roadmap to the answers.

And whilst we can’t promise to provide all the answers, there are platforms and solutions available to help clients on this journey.  Imagine if you could unpick the data and drill directly through to source documents, to see what is driving changes in your ESG metrics in real time.  What about organising and prioritising the data to fit your firm’s definition of ESG?  One that fits with your firm’s culture not the opaque definition and construct of someone else.  Imagine if you could triangulate from multiple sources to find something much closer to the objective truth.

It's an exciting time to work with clients on ESG – a topic that will help define the future of business. Now is the time to understand the choices and actions needed for change. And using reliable, transparent, objective and verified data is the first step.

I would encourage you to take some time and look at our report, in collaboration with Google Cloud, on closing the disconnect in ESG data here. Further information can be found on our ESG webpage - If you would like to discuss further, please reach out to a member of the team.