• Noeleen Cowley, Partner |
4 min read

The clock is ticking for banks to integrate Environmental, Social and Governance (ESG) into their businesses. There has been a shift in focus and Government policy and regulation is no longer the primary driver. Financial institutions are experiencing increasing pressure from the customer, market and societal expectations to act responsibly, as discussed in our previous article on ESG transformation in financial services. Organisations that are prioritising ESG transformation are already capitalising on its value and those not acting proactively risk being left behind.

Meeting these challenges requires banks to fundamentally re-think the way they do business. ESG needs to be embedded into every aspect of operational processes, enabling the business as a whole to support a sustainable future in line with the overall business strategy.

At KPMG, based on our in-depth experience working with banks at all stages of their ESG journeys, we have developed a framework providing detailed transformation roadmaps across each function within a bank. This article outlines a practical approach to achieving a successful ESG transformation in the banking sector.

Cross-functional collaboration essential for effective transition

Cross-functional collaboration will be a critical success factor in achieving ESG transformation. This creates not only organisational buy-in and effective cultural change, but also consistency in mitigating ESG risks and embedding a robust reporting and disclosure strategy.

All the typical functions in a bank will play an important role in facilitating ESG change. Our framework outlines the role of each in achieving transformation.

Figure 1: Roles of functions in facilitating ESG change

Top of House

Commercial & Wholesale Banking

Corporate & Investment Banking

Retail Banking

Relationship Management





Risk Management

Internal Audit


Infrastructure/Shared Services





Marketing & Comms

Phases of ESG transformation implementation

End-to-end ESG change is split into three transformational phases against required delivery timelines, in line with ESG regulatory milestones. These phases help map the critical path of transformation activities needed, providing a detailed plan to meet specific ESG objectives. 

Figure 2: Three phases of ESG change

Transformation phase

Transformation phase

Vision, strategy & current state assessment

Design & prioritise

Implement, monitor & adapt

Delivery timeline

Delivery timeline

Q2 2022 – Q1 2023

Q2 2023 – Q4 2023




  • Align the Target Operating Model (TOM) design to the organisation’s strategic ESG goals. Including understanding both mandatory ESG commitments as well as voluntary commitments.
  • Perform a current state assessment across the organisation to identify gaps and articulate scope of change required.
  • Build the target state, aligning the business model to core ESG objectives.
  • The target state should be designed across six layers:
    1. Service delivery
    2. People
    3. Functional processes
    4. Technology
    5. Data
    6. Reporting & governance
  • Prioritise key transformation activities based on impact and define delivery plan
  • Develop and sign off the business case for executing the TOM.
  • Deliver training, implement the TOM and commence post go-live support, including continuous improvement activities such as regulatory, legal and tax horizon scanning, amending policies and processes accordingly.

Applying the framework

Below is an example of how this framework could be applied to a core ESG objective – achieving Net Zero – through the functional lens of Finance.

Finance plays a crucial role in helping align the business model to a Net Zero future. Finance works across functions and business units and is in a position to lead an organisation’s ESG reporting and data management programs. Finance sub-functions, such as the financial planning and analysis organisation, can connect ESG information, drive insights, and report on progress.

Vision, strategy and current state assessment

  • Establish sustainability guiding principles that will steer investment decisions to create value. Align with senior management, the business and risk management to define a strategy in line with the wider ESG risk appetite and corporate Net Zero strategy.
  • Work closely with the risk and reporting functions to develop a current state materiality assessment. Undertake a Net Zero risk impact assessment, understanding all associated financial and non-financial risks and how they can be mitigated.

Design and prioritise

  • Prioritise strategic initiatives by incorporating ESG drivers into business cases and quantifying sustainability impacts.
  • Develop carbon accounting processes in line with Green House Gas (GHG) protocols and accounting standards.
  • Utilise carbon accounting processes to determine capital allocation strategies and processes.
  • Work with the reporting function to develop a framework for both external and internal performance reporting, demonstrating Net Zero efforts to investors and stakeholders.
  • Work closely with the tax function on relevant accounting implications for restructuring, in line with strategy set by the Board
  • Work with the IT function to identify and meet data requirements to fulfill regulatory obligations, as well as implementing strategic reporting tools.

Implement, monitor and adapt

  • Monitor and regularly review Net Zero related financial and non-financial metrics in collaboration with the risk and compliance function.
  • Conduct continuous improvement activities, such as cyclical Net Zero control and reporting reviews and regular horizon scanning of regulations, as well as continuing to automate and streamline reporting capabilities, removing the need for manual intervention.


ESG is not just a point in time, a single initiative, or a specific product. It is a journey of continuous improvement; a process aligned between stakeholders, product owners, culture, customers, and regulators.

As outlined in the framework above, successful navigation of this transition hinges on functional cross-collaboration. Banks need to create the culture, channels and processes that enable functions to communicate effectively around ESG topics, support each other in defining and prioritising objectives, and working together to deliver holistic ESG transformation.

Market leaders in financial services are already implementing many of the actions outlined above. KPMG’s Financial Services ESG Consulting team can help you understand the challenges, best practices, and strategies for achieving effective ESG transformation. 

Contact us at ukfmfsesg@kpmg.co.uk for a confidential discussion to ensure your ESG journey is as timely, effective, and efficient as possible.