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Understanding stakeholder expectations     |     An enterprise wide vision of ESG     |     Maximizing the opportunity

 

COVID-19 has highlighted the critical role banks play in supporting the resilience of communities. It has brought issues of financial security, access to financial services, and inclusion to the forefront placing banks at the crossroads of economic and social issues as never before.

At the same time, concerns regarding climate change are also accelerating amid predictions it will have a more significant and longer-term economic impact than the pandemic. Banks have a critical role in financing the transition to the low carbon economy, as well as the need to identify and manage climate risks related to business activities.

The world is a different place as a result of COVID-19, which has also accelerated the shift to stakeholder capitalism. Banks must decide how they wish to respond to this new reality, and seize the unique chance to influence a new normal in business and finance.

Understanding stakeholder expectations

The first step is to understand where your business stands today through the eyes of your key stakeholders. In KPMG firms’ experience, stakeholder expectations are high and increasingly relate to how the financial institution is contributing to solutions facing society and the economy. 

The past few months have put a particular spotlight on culture, human capital management, and the robustness of supply chains. In addition to scrutinizing how the organization operates, customers and clients are looking at how it models leadership by offering banking and investment products that align with their values and contribute to societal and environmental solutions.

Institutional investors and regulators also have increasing expectations regarding conduct and disclosures that fall into the spectrum of ESG – the environmental, social, and governance factors that present material risks and opportunities for the business.

An enterprise-wide vision of ESG

These changing expectations reflect a new way to think about ESG and how it can create value for banks. Fully integrating ESG as part of the way you do business, not just manage risk, can create new business opportunities and serve to attract and retain customers. Considering ESG as part of all business decisions based on a deep understanding of stakeholder expectations, and how an ESG lens on core business activities can contribute to broader strategic objectives can enable significant differentiation from competitors.

Considering ESG as part of all business decisions based on a deep understanding of stakeholder expectations, and how an ESG lens on core business activities can contribute to broader strategic objectives can enable significant differentiation from competitors.

Many banks have already taken an initial step along this path by developing a purpose statement that includes aspirations beyond traditional business goals. It is important to have an enterprise-wide vision and ambition regarding ESG that the organization can work towards. Ask yourself: how can we leverage ESG to strengthen our business? What influence do we want to have? How can we be truly bold and create something that both differentiates us and really reflects our values as an organization?

Maximizing the opportunity

These are unprecedented times that we live in. For all the challenges, this also means that there is an opportunity to have a greater impact than ever. In the light of this, three thoughts to close with:

  1. Now is not the time to be incremental – COVID-19 has hugely accelerated and amplified the issues that ESG concerns itself with. Be bold in what you do.
  2. Be authentic – everything that you do must be rooted in the bank’s values and reflect the way that the bank wants to do business. Don’t commit to things you don’t believe in. Stakeholders expect accountability.
  3. It’s a journey – you won’t get to where you want to be overnight. It takes time and perseverance. This makes it even more important to engage your stakeholders as part of the journey.

Member firm clients are energized about the possibilities ahead. Having demonstrated tremendous agility in response to the pandemic, this combined with stakeholders’ perspectives on ESG can contribute to a bank’s resilience over the long-term.

  

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Country Insights

Explore how these trends are unfolding in in your country using the interactive map below.

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— Sweden — Denmark Spain — Columbia — Canada (English) — — Canada (French) UK — China — Australia — — Germany US —