As we mark Earth Day 2020 and reflect on our collective global journey toward a sustainable future, we should not underestimate the power of today’s asset management industry to drive environmental and social change. Earth Day’s 2020 theme is ‘Climate Action.’ This year, of course, we also face COVID-19
And with our industry well-positioned to drive immense change toward a sustainable future, asset managers everywhere should be asking themselves a timely question: What role am I playing to address today’s critical environmental, social and governance (ESG) challenges?
Responsible investing is not a compromise. Heightened awareness of ESG issues and the drive for better-informed investment decisions have become mainstream, delivering both positive financial results and progressive outcomes for the environment and society at large. KPMG member firms are committed to helping businesses invest responsibly by seizing sustainable opportunities that combine social benefits with financial results. The threats we face are real and the time for businesses to act is now – it's decision time.
Make no mistake, the COVID-19 pandemic dramatically magnifies both the importance of ESG and the need for decisive action. The current health challenge exemplifies the interdependent relationship a company has with the community it serves, while highlighting the prominent role that ESG factors play in enhancing business resilience.
Asset managers, investors and businesses are recognizing how assessing climate-related considerations enhances financial performance and competitive advantage while simultaneously reducing carbon footprints and environmental threats. At the same time, consumer demand for responsible investing is surging, especially among the younger generation, and we are seeing governments and regulators demand greater ESG accountability to improve long-term economic and social stability.
It’s worth noting, prior to the global spread of COVID-19, climate change was at the top of the agenda for executives as evidenced by this year’s annual meeting of the World Economic Forum in Davos, Switzerland. A significant outcome was the WEF International Business Council’s (IBC) publication of new proposals for common metrics and reporting disclosures regarding ESG factors. KPMG professionals were part of the international team that developed the report encouraging IBC members to align mainstream reporting and drive progress on global sustainability goals.
There is no doubt that where investors put their money has the power to dramatically change the future of our planet and the well-being of society. The world’s growing awareness of how investing decisions impact climate change and resource scarcity is redefining the investment landscape. Embedding ESG factors into financing decisions, practices and policies is now the norm. And the current health crisis is clearly demonstrating just how intricately linked social, environmental and economic issues are today.
If we look to KPMG’s 2019 Global CEO Outlook (PDF 934 KB), 76 percent of CEOs surveyed believed future business growth will depend on their ability to shift to a low-carbon, clean-technology economy, while 55 percent believed that their organizations must look beyond purely financial growth to sustain long-term success. Meanwhile, 71 percent of Asset Management CEOs said they feel responsible for ensuring that the ESG policies of their firms reflect the evolving values of their clients. While the COVID-19 pandemic has put some initiatives on pause, including the postponement of COP26 to 2021, we firmly believe that CEOs around the world remain committed to the ESG agenda, with ‘S’ issues likely to get increased focus alongside ‘E’.
KPMG’s global network of professionals working in Asset Management and beyond are passionately committed to improving society and the communities in which we live and work through responsible business practices. KPMG’s Global Climate Response initiative, launched in 2008 to significantly reduce the environmental impact of KPMG member firms globally, continues to drive improvements, including a target to meet 60 percent of our combined global electricity needs via renewable energy by 2020. KPMG firms in Ireland, Brazil, Spain and the Netherlands have already achieved carbon neutrality and 100-percent reliance on renewable energy, while KPMG in the US is on track to achieve 100 percent renewable energy use this year.
Progress is being made everywhere today but we recognize the need for everyone to do more. As individuals, we can wield tremendous power within the consumer marketplace by directing our collective spending power toward businesses that actively support environmental sustainability. As investors, we can direct our investment dollars toward companies and financial products that prioritize ESG goals. As business leaders, we can more deeply incorporate ESG into the way we operate our businesses and, in doing so, increasingly meet the needs and expectations of both our stakeholders and society at large.
There should be no doubt that sustainable investing will play a significant role in asset management in a post-COVID world, given its growing appeal beyond those who identify as impact investors. As more businesses identify as purpose-driven, and the momentum builds to establish standards around ESG and impact frameworks and metrics, the work of asset managers and asset owners will become easier.
Along the way, we encourage fund managers to continue building trust with clients and investors, while also promoting continued cooperation at the industry level. A concerted effort across the ESG and impact-investing ecosystem will drive growth in this market. Simply put, this is the future of finance.
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