ESG (environmental, social, governance) has risen to the top of the regulatory agenda. Fears that it would fall off the radar due to the COVID-19 pandemic have been quashed as the crisis has highlighted that business sectors are deeply interconnected across borders, that societies of all types and wealth levels are vulnerable, and that the environment is under increasing strain. There is strong momentum to change the financial services landscape for the better. However, firms need to balance improving their ESG credentials with the need to survive the impacts of the crisis and manage issues such as credit risk, cost reduction and consolidation.

For banks and insurers, the financial risks of climate change are in sharp focus as regulators set out expectations for stress testing and climate risk management. Asset and fund managers and asset owners are being required by regulators and investors to embed sustainable investment throughout their businesses and to consider the full spectrum of ESG.

The search for consistency remains a priority. The key to achieving this, and to enabling the development of reliable market data, will be standardised definitions of E, S and G, globally. Recognising the challenges that companies are facing in making ESG disclosures, standard-setting bodies are seeking to enhance and align their approaches to corporate reporting, both financial and non-financial. And in the EU, the definition of E is now enshrined in law.

On this page you will find insights and thought leadership from KPMG's EMA FS Regulatory Insight Centre on the steps that regulators and firms are taking in the transition to an ESG-aware financial system.