Our survey offers guidance to financial institutions in assessing where they stand in relation to the competition. Find out more now.
In recent years, environmental, social and governance risks, commonly referred to as ESG risks, have been receiving a great deal of attention from both the public and from regulatory authorities and, accordingly, have become increasingly important to banks in their risk management processes.
Banks see themselves faced with stricter reporting requirements on ESG risks
Many financial institutions have already started to integrate these risks into their business models but are facing challenges with regard to disclosures and reporting to the responsible authorities since requirements have become more stringent and precise.
Are banks meeting the increasing requirements?
How does this look in practice? Are banks able to implement the regulatory expectations in their risk management framework? In a survey published by the ECB in March 2022, all systematically important financial institutions (SIs) directly supervised by the ECB were requested to detail their progress with regard to ESG risks.
In order to support this process and to provide the participating banks with some insights, we created a benchmark survey that is strongly based on the ECB survey but also covers some further topics. The responses of the 33 financial institutions are included in our English-language Whitepaper: "ESG Risk Management in Banks".
KPMG benchmark survey on the ECB's 13 expectations
A key focus of the survey is on the ECB's 13 supervisory expectations on climate and environmental risks in strategy and organisation, overarching risk management & framework, internal and external reporting, and risk type-specific expectations.
Conclusion: Banks place a particularly high priority on climate-related risks
Overall, banks place a particularly high priority on climate-related risks, while the prioritisation of environmental risks (such as loss of biodiversity), social risks and governance risks is less pronounced and varies widely.
One possible explanation relates to the more complex cause-and-effect relationships associated with environmental and social risks as opposed to climate-related risks. As a result, it may be more difficult for banks to understand these risks and to incorporate them into their risk management.
All findings and potential fields of action are presented in our Whitepaper: "ESG Risk Management in Banks".