2020 was expected to be the year of action on the environmental, social and governance (ESG) agenda. This begun with a strong focus on climate change at the World Economic Forum meeting in January and was followed by a flurry of announcements from big corporates, from RBS to BP, committing to the UK government’s net zero carbon target by 2050. The momentum to COP26 in November 2020 was building day by day. Then came COVID-19 and rightly the public health, economic and social impacts have taken priority. But slowly, both the financial and political worlds are waking up to the importance of building a resilient economic future with positive environmental, social and governance factors at its core. Jim Liddy, Chairman of KPMG’s Global Financial Services practice, sets out six considerations for financial institutions as they — along with governments, policy-makers and other business sectors — grapple with how to respond to the current situation and what actions to take.
Within this publication, we focus on the ‘upside’ for financial services firms of the ESG agenda rather than the risks. We highlight opportunities, explore exciting new trends and dig deeper into new and emerging growth areas. We see that many banks and asset managers are getting ahead of the emerging regulation and see ESG as central to their long-term strategy to attract more customers, capital and new revenue streams. We talk to leaders in the field — like Goldman Sachs in the US, profiled on page 8 — to find out how they are turning the ESG agenda to their advantage, sending a strong signal to the market.
Yet we are certainly not ignoring the risks. We seek to tackle — head on — many of the biggest challenges facing the industry globally today. We look at the growing demand for standardised approaches to ESG measurement and disclosure, as well as the work done by KPMG UK with the WEF International Business Council to devise a common set of ESG metrics globally. We assess the ever-changing political and regulatory expectation (which is further complicated by Brexit) and the influence on the financial services agenda. And we acknowledge the potential for significant financial disruption as the world moves towards a low-carbon economy. We also acknowledge that the impact will vary across banking, insurance, asset management and private equity and the markets and geographies in which they operate.
The difference is that, at every step, our authors and contributors focus on illuminating the opportunities. They offer constructive advice for dealing with the challenges. And they use real- world examples to demonstrate that the ESG agenda can drive positive results for those financial services firms willing and able to embed ESG into their strategy and operations.
KPMG UK is leading the way amongst the global member firms in developing strong propositions in this area, engaging with clients, governments, financial services authorities, regulators and standard-setting bodies. We intend to help reduce the complexity and uncertainty of the transition through innovation, such as the use of advanced data analytics, and our core capabilities as a firm in transformation and client-issue led consulting, whilst continuing to develop our ESG skills and expertise. And we are taking steps to ensure KPMG UK’s own activities are aligned and progressing the global ESG agenda.
We hope that this publication serves as a catalyst to the UK financial services industry — that it inspires optimism and encourages action — allowing UK financial services executives to combine both purpose and profits to the greater good of society and shareholders alike.
On behalf of KPMG’s global network of financial services professionals, we would like to thank all of those who contributed to this publication. Particularly, Tom Brown, Julie Patterson and Steven Hall in the UK. By sharing your ideas, experiences and insights, you are helping drive forward a more resilient and more successful financial services industry. To learn more about the issues raised in this edition of Frontiers in Finance — or to discuss your organisation’s unique ESG agenda and roadmap, or the impacts of COVID-19 — we encourage you to contact your local KPMG member firm or any of the authors listed in this publication.