As we wrap up year 2021, we are certain that the three-letter acronym “ESG” standing for Environmental, Social and Governance commitments sounds familiar to most of us. Sustainability has evolved from recycled catchphrases and general information points to specific requirements, tangible actions and quantifiable results.
Reflecting on the steps that we at KPMG have taken in the direction of sustainability, in October 2021 we announced our global ESG strategy, which is our multi-year commitment to invest more than USD 1,5 billion over the next three years to further develop our ESG capability and provide vital solutions to our clients to support them on their journey. Our focus, inter alia, will be on providing sustainable strategy, risk management, operations and investment solutions. In recognition of the need to play our part in contributing to environmental and social aspects, our dedication is to embed ESG in our daily practice, so that ESG runs as a watermark through everything we do, both through our global network as well as through each KPMG member firm.
Our ESG commitments can also be found under our umbrella Impact Plan, which outlines our impact on four major categories: Planet, People, Prosperity and Governance. Our Planet commitments relate to decarbonization efforts to achieve net-zero CO2 emissions by 2030, provide our clients information on the impacts of climate change and understand and improve our impact on nature and biodiversity. Furthermore, we strive towards fostering an inclusive and diverse culture, where we aim to provide equal opportunities for everyone, commit to continuous learning and put the well-being and health of our people first. Our Prosperity commitments stem from our belief that our work for our clients should also be good for our people and the world. We achieve this by working objectively, independently, ethically and with integrity. Through our audit, advisory and tax services, we aim to help businesses run more effectively, fairly and transparently. These commitments also spill into our governance purpose, as we commit to act in the public interest, act lawfully and ethically.
From the legislative point of view, the European Commission has also continuously made efforts towards driving the sustainability agenda. The European Green Deal (EGD) was developed to tackle challenges arising from climate change and environmental degradation and will be financed by the NextGenerationEU Recovery Plan and the EU’s seven-year budget. EGD targets are translated into actions across specific sectors such as Energy, Transport, Climate and other sectors.
This year, with the introduction of the Corporate Sustainability Reporting Directive (CSRD) proposal, it is clear that companies are required to look beyond their internal processes and think about their impact on society and environment, which forms part of the double materiality concept of the CSRD (article here). CSRD was proposed to address some shortcomings of the existing Non-Financial Reporting Directive (NFRD), mainly to include companies which fell outside of its scope. CSRD will apply to all large companies meeting at least two out of three following criteria: (i) more than 250 employees, (ii) more than EUR 40 million turnover, and (iii) more than EUR 20 million total assets, as well as all listed companies. Such companies will be required to report on their targets and their progress, and report in line with Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation. The report will have to form part of the company management report.
Looking closer to home and the significant actions that have taken place in Malta, it is worth mentioning that on 1 December 2021, the Ministry for Energy, Enterprise and Sustainable Development launched an ESG Platform, designed to cater for transparency among companies and unlock a flow of investment into sustainable companies and projects. Currently, the Platform’s database contains ESG metrics of entities listed on the Malta Stock Exchange, with plans to include non-listed companies in the near future. Any company wishing to list on the Platform is free to submit the relevant information through the website.
Moreover, the Malta Stock Exchange (MSE) is promoting ESG investments via stimulating the listing of Green Bonds, (article here). Issuers wishing to raise funds for green projects would qualify for discounted listing fees as long as they meet MSE’s Green List eligibility criteria. For companies to qualify for such a listing, investment must be made into environmental projects such as Climate Change Mitigation, Climate Change Adaptation, Pollution Prevention, Sustainable Use of Water and Marine Resources and other projects. Entities issuing green bonds in Malta can benefit from 50% discount on MSE listing fees and use up to 25% of proceeds for own operations.
To conclude, 2021 saw important ESG developments across many plains. We strive to continue making an impact through our global ESG strategy and deliver high-quality solutions for our clients and the world at large. As Aristotle said, “we are what we repeatedly do. Excellence, then, is not an act but a habit.”