Frontiers

in Finance
Issue #62

Purpose or profit?
Why not both
On the cover
Kara Mangone and Kyung-Ah Park
Goldman Sachs, page 8

Featured interviews
Rohitesh Dhawan, Eurasia Group
Kay Swinburne, KPMG in the UK,
page 60

May 2020

home.kpmg/frontiersinfinance
Foreword

Letter from
the editors
Purpose and profits combined
Chairman’s message

In this edition of Frontiers in Finance, we focus on an area of rapidly growing importance to the Cover story: Goldman
financial services sector — the enviromental, social and governance (ESG) agenda. The topic is
Sachs: Leading towards
only gaining in relevance and significance to the way firms operate in today’s world.
a sustainable future
However, in the intervening period since work on planning and compiling the publication began,
another truly momentous issue has confronted all of us globally, COVID-19.
We have decided to retain our focus on ESG as it is an area that cannot — and should not — be
ignored. In fact, COVID-19 exemplifies the interdependent relationship a company has with the
community it serves, and highlights the prominent role that impact and key ESG factors have New models for an ESG-
in contributing to the resilience of a business. Jim Liddy, Chairman of KPMG’s Global Financial aware financial system
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.
It is to be hoped that the virus will be contained and economies will overcome, and then bounce
back from, the shocks. In the same vein of positivity, we focus on the ‘upside’ for financial services
firms of the ESG agenda rather than dwelling on the fear or gawking at the risks. We highlight Measurement and reporting
opportunities, explore exciting new trends and dig deep into new and emerging growth areas.
We talk to leaders in the field — like Goldman Sachs, profiled on page 8 — to find out how they
are turning the ESG agenda to their advantage, sending a strong signal to the market. And we
spotlight encouraging global and regional efforts aimed at helping smooth the transition to an
ESG‑aware financial system.
Yet we are certainly not ignoring the risks. Within this publication, we seek to tackle — head Political and regulatory
on — many of the biggest challenges facing the industry today. We look at the growing landscape
demand for standardized approaches to ESG measurement and disclosure. We assess the
Jim Suglia ever‑changing political and regulatory expectation and the influence on the financial services
KPMG in the US
agenda. And we acknowledge the potential for significant financial disruption as the world
moves towards a low-carbon economy.
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.
At KPMG, our global network of financial services professionals is committed to playing a
positive role in the discourse around the ESG agenda. KPMG member firms are engaging with
clients, governments, financial services authorities, regulators and standard-setting bodies to
Ton Reijns
KPMG in the Netherlands help reduce the complexity and uncertainty of the transition. And we are taking steps to ensure
our own activities are aligned and progressing the global ESG agenda.
We hope that this publication serves as a catalyst to the financial services industry — that it
inspires optimism and encourages action — allowing 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. 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
Maria Trinci
On secondment with organization’s unique ESG agenda and roadmap, or the impacts of COVID-19 — we encourage
KPMG in the UK you to contact your local KPMG member firm or any of the authors listed in this publication.

© 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Contents
Chairman’s message 4
Cover story:
Goldman Sachs: Leading towards 8
a sustainable future

Chairman’s message
36 Driving smart-city development

12 56
New solutions for creating bankable
smart-city developments.

40 Promoting ESG in Asia Pacific:

Asset managers lead the way Cover story: Goldman
A look at ESG investment actions Sachs: Leading towards
by countries and companies in Asia a sustainable future
Pacific.

44 From protection to prevention:

Insurers respond to risks of
New models for an natural disasters New models for an ESG-
ESG-aware financial system A look at the impact of climate aware financial system
change with more frequent, intense
and destructive events. Political and regulatory
landscape
12 The COVID-19 evolution of

48
capitalism
COVID-19 highlights the importance
of delivering societal impact beyond 56 Overseeing the transition: Measurement and reporting
financial returns. Central banks move on climate
change
16 Embedding ESG into banks’
What financial system stakeholders
strategies
need to know about central banks’
How increasing interest in ESG is
action on climate risk.
playing out in a bank, its strategy,
underwriting, external disclosures. 62 The politics of ESG: Where are Political and regulatory
governments heading? landscape
20 Preparing for climate-related
An interview with Eurasia Group and
disclosures
KPMG on the complexities of politics
Insurers address climate
Measurement and and the ESG agenda in light of the
governance, strategy, risk
coronavirus.
management and measurement reporting
aspects of their underwriting and 66 The beginning of the ESG
investing activities. regulatory journey: Asset
48 Towards consistent and managers navigate sweeping EU
24 Diversity and tax become key
comparable ESG reporting sustainability regulations
components of ESG
In this article we discuss the IBC Key elements of the forthcoming EU
A look at how tax and diversity on
consultation on common metrics sustainable finance regulation and its
boards can help the sustainable
and consistent reporting of expected impacts.
long-term development and
financing of assets. sustainable value creation.

28 Creating trust in ESG data 52 Creating an impact management Spotlight on coronavirus

Using distributed ledger technology framework
6 Six considerations on the
(DLT) to share verifiable ESG data, in A look at the Cambridge Institute
impact of COVID-19
real time, across all parties. for Sustainability Leadership (CISL)
Investment Impact Framework 60 Central banks respond to
32 A new way of looking at climate for assessing portfolios of listed COVID-19
risk for physical assets equities.
Climate change is creating new
risks and societal needs highlighting
the urgency for insurers to adapt
services to the shifting landscape.
© 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Chairman’s message

A new view Chairman’s message

on value
James P. Liddy
Cover story: Goldman
Sachs: Leading towards
a sustainable future

Global Chairman, Financial Services

KPMG International
New models for an ESG-
aware financial system

We are living in exceptionally challenging As we move through the current pandemic

times. COVID-19 is severely testing the we see the ESG agenda becoming even
resilience of individuals and families, more relevant. Measurement and reporting
economies and businesses. As I note in
an article on page 6, financial services
It’s not just that customers, regulators and
investors are becoming more socially- and
... ESG is the
institutions are on the front line of helping
economies cope, providing liquidity and
environmentally-conscious (and they are).
It’s also that financial services firms (and
new lens
support to corporate and retail customers.
their supervisors) now recognize that ESG through which
Political and regulatory
However, as governments, businesses
and citizens start to look towards the ‘new
is the new lens through which companies
will be evaluated, and those that not only companies will landscape
reality’ of life after COVID-19, considerations
related to environment, social and
embrace the principles, but positively
demonstrate their commitment through
be evaluated,
governance (ESG) issues are rising up the
agenda. As Alok Sharma, the UK Climate
action, will be clear winners going forward. and those that
Secretary and president of COP26, recently
My conversations with executives suggest
many financial services firms are starting
not only embrace
noted, “the world must work together
to support a green and resilient recovery,
to embrace the ESG agenda in earnest.
The reality is that, in the past, most
the principles,
which leaves no one behind.1” Financial
services organizations will be expected to
financial services firms were approaching but positively
be at the forefront.
the issues rather reactively; the focus was
often on building a ‘defendable position’ demonstrate their
Indeed, the days where companies could
be evaluated, most predominately, by their
that could be brandished if and when
the business was challenged. ESG was
commitment
growth, profits and go-forward prospects viewed as little more than a reputational through action,
are now gone. Today, what people really
want to know about is the company’s
risk to be managed.
will be the clear
culture, values and purpose. That is forcing
a massive change in the way financial winners going
services firms operate and compete. forward.

https://www.bbc.com/news/amp/science-environment-52418624
1

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Chairman’s message

Now, however, asset managers, insurers At the end of the day, however, most
and banks are starting to see ESG as financial services executives understand
a centrist principle (much like cost, that new risks bring the potential
compliance and customer experience) that for new rewards. But reaping those
must be incorporated into the very core rewards requires them to gain significant
of the organization’s decision‑making and
experience and capabilities ahead of their Chairman’s message
strategic processes. It is the lens through
competitors. The skills they develop,
which the board and the executive team
view their future. It is the prism through
the partnerships they build and the
which they demonstrate their values and data they capture in their ESG activities
purpose. Goldman Sachs, featured on page today will allow them to identify those
8, is a prime example of an organization new opportunities and maximize their
placing ESG at the center of their strategy. rewards tomorrow. Cover story: Goldman
Sachs: Leading towards
The upside of action Start executing a sustainable future
While it would be nice to think that financial However, as this edition of Frontiers
services executives are embracing the ESG in Finance clearly illustrates, the path
agenda for purely altruistic reasons, my towards creating value from ESG is
conversations with industry leaders suggest far from clear. COVID-19 may have
many see a significant ‘upside’ to taking a New models for an ESG-
focused minds on the need for faster
leadership position now.
action on the ESG agenda, but it has aware financial system
In part, the leaders are seeking to take also demonstrated that there are many
advantage of a clear shift in social complexities and considerations that
expectations. They understand that must be understood and managed.
customers are increasingly judging Financial services leaders will face some
companies based on their action — both in daunting questions. Indeed, many
dealing equitably with customers harmed financial services executives are not even Measurement and reporting
by COVID-19 and on the ESG agenda. sure where they should start.
They see growing demand for ESG-linked
products and services. And, they assume My advice is to begin with an
(likely correctly) that their focus on ESG will introspective look at your organization,
bring them new customers, new capital and its culture and its values to define a
new revenue streams. clear purpose around the ESG agenda.
Consider what customers, investors Political and regulatory
Many also recognize that regulators, policy
makers and oversight authorities are starting and regulators will expect from your landscape
to see ESG as part of the larger systemic organization in the future. Figure out
risk environment. While formal regulation how you will measure your success and
has (to date) been slow to emerge, the progress. Then translate that purpose
leading financial services organizations are into specific actions and steps that
striving to get out ahead of the regulatory Contributor
demonstrate you mean what you say.
stick. They are looking to be masters of their
own destiny. Perhaps most importantly, my counsel
to financial services leaders is to just get
Some also see action on the ESG agenda
as a way to help solve their human capital on with it. In this arena, actions speak
and intellectual property challenges. They much louder than words. The winners
understand that the best and brightest of will not be those that talked the loudest
James P. Liddy
today’s talent want to contribute to more but rather those that made the most KPMG International
than shareholder returns; they are looking impact. E: jliddy@kpmg.com
for companies that share their own personal Jim is the Global Chairman, Financial
purpose and values. Smart financial Services, KPMG International. He also
leads KPMG in the US’ Financial Services
services firms are using the ESG agenda practice. Prior to assuming his current
to attract the talent and capabilities they roles, Jim served as Americas Leader,
need going forward. Global Financial Services.

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Spotlight on COVID-19

Six considerations
for financial Chairman’s message

institutions in Cover story: Goldman

Sachs: Leading towards
a sustainable future

dealing with the New models for an ESG-

impact of COVID-19 aware financial system

James P. Liddy
Global Chairman, Financial Services Measurement and reporting
KPMG International

W
ith COVID-19 still gripping the world and posing
enormous health, societal and economic Political and regulatory
challenges to us all, I’d like to share some landscape
perspectives based on discussions that I and the Global
Financial Services Leadership Team are having with
colleagues and clients of KPMG member firms.
The main consensus is that we will be dealing with the
effects of COVID-19 for the foreseeable future. The economic
shocks are already looking profound, even in the world’s
strongest economies. We have seen central bank stimulus
packages on a scale not known before, interest rates are
at record lows in many major markets and governments
have announced extraordinary support measures. But still,
recovery back to anything like economic health may take
quite some time.

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Spotlight on COVID-19

Financial services business leaders across the globe are consistently focused on six principle challenges in dealing with the impact of
COVID-19 and in dealing with the increasingly stringent containment measures that governments are putting in place:

Employees
How you treat your employees now will have a massive effect on their wellbeing, and consequently on their
loyalty and productivity. Be very vocal with your support for any changes they need to make to work arrangements Chairman’s message
and performance targets in order to fulfil their responsibilities to their families and communities. Be a champion of
1 good citizenship, and support containment and home-working where it is possible.
Financial services institutions all over the world are making significant changes to working arrangements — in
some cases speaking with regulators to ensure that these meet compliance expectations  — and this is helping
them continue to deliver services to their customers. Cover story: Goldman
Sachs: Leading towards
Customers a sustainable future
In severely hit countries, business customers are experiencing urgent needs as revenues are disrupted while,
on the personal side, hard-working people’s incomes are coming under threat. The role of financial institutions
becomes more important than ever — where possible, providing liquidity, support and necessary forbearance to
2 personal customers undergoing temporary difficulties. It is important too that they give regular reassurance on
continuity of service delivery. Customers also need to know how their providers are dealing with issues directly New models for an ESG-
related to COVID-19  — health and travel insurance, investment portfolio performance and online payment aware financial system
facilities. For companies, effective digital delivery of services is essential while organizations deal with staff
shortages, office closures and other public health protection measures (e.g. businesses refusing to handle cash).

Liquidity
Financial services companies need to thoroughly understand their available capital and liquidity resources and to
3 assess the resilience of these. Central banks have been delivering enormous stimulus packages in order to offset
a larger, systemic liquidity crunch. This is bringing down borrowing costs, but there is a risk that some companies
Measurement and reporting
will hoard cash and open credit lines to keep their businesses going through the crisis.

Supplier relationships and third-party dependency

Financial services companies (and their customers) have substantial third-party networks  — vendors (including
4 in-person agent networks), outsourcing partners, technology providers, etc. They need to regularly assess and
Political and regulatory
monitor these third-parties on information security, business continuity and other risk domains. The COVID-19
impact forces companies to review these suppliers, assess which are most likely to be impacted, which are critical landscape
to ongoing business operations, and where they need to urgently mitigate risks posed by these relationships.

Communications and transparency

As the business and economic impacts of COVID-19 bite, financial services companies will need to ensure
that they are communicating effectively with multiple stakeholders: employees, customers, shareholders and
5 regulators. The situation is a breeding ground for disinformation and rumour, so financial services companies
need to ensure that they are clear about the steps they are taking to manage the impact of COVID-19. Regulators
expect financial services companies to focus on and ensure continuity of their core operations, including
support for their customers. Financial services companies need to regularly assess their digital communication
capabilities, and how to leverage such capabilities to communicate with customers and the broader marketplace.

Scenario planning
Financial services companies are in the business of imagining the future — understanding the significant
6 immediate challenges to society and economies posed by COVID-19 and how this will impact the interconnected
financial system. They are using their scenario modeling and contingency planning expertise to help themselves
and their customers to make good decisions in the face of a highly volatile operating environment. They will also
need to incorporate new indicators, prioritized by the COVID-19 outbreak, into their decision-making activities.

At a time of uncertainty it is important that we share our insights and experience as much as possible, helping each other to contain
and mitigate the impact of COVID-19 on the financial system and the broader economy. KPMG professionals are speaking every
day with financial services business leaders, and will continue to share our insights into how the industry is responding.

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Cover story

Leading Chairman’s message

towards a Cover story: Goldman

Sachs: Leading towards
a sustainable future

sustainable New models for an ESG-

aware financial system

future
Goldman Sachs looks to
Measurement and reporting

become the ‘go-to’ financial Political and regulatory

institution for sustainable landscape
finance.

Kara Mangone, Goldman Sachs

Kyung-Ah Park, Goldman Sachs
Jitendra Sharma, KPMG in the US

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Cover story

“The needs of our clients will increasingly linked services increase dramatically,
be defined by sustainable growth,” wrote particularly among corporate clients  —
David Solomon, chairman and CEO of including those in traditionally more
Goldman Sachs in a recent editorial in the
Financial Times1. “Our firm’s long‑term
carbon intense sectors — and pension
funds, institutional investors and public Our focus is on
financial success, the stability of the
global economy and society’s overall
sector funds.
partnering with all Chairman’s message
well-being depend on it.”
“Over the past 12 to 18 months, the
dialogue from our clients has really of the businesses
And with that, Mr. Solomon announced
Goldman Sachs — one of the world’s
accelerated,” noted Kara Mangone,
Chief Operating Officer of the Sustainable
to deliver
leading global investment banking, Finance Group. “It’s not just the volume our holistic
securities and investment management of requests and interest we are getting — Cover story: Goldman
firms — would be mobilizing it’s also the depth and complexity of the capabilities Sachs: Leading towards
US$750 billion through financing,
investing and advisory activity over
challenges our clients are trying to solve.
It’s becoming incredibly strategic and while coming a sustainable future
the coming decade to address climate
transition and inclusive growth. The firm
multifaceted.”
up with the
would focus on nine key areas, he noted,
including clean energy and transport,
Recognizing that the firm would need
to take a much more proactive and right strategy
sustainable food and agriculture, and
coordinated approach, Goldman Sachs
created the Sustainable Finance Group
and the right New models for an ESG-
aware financial system
financial inclusion.
While the headline number certainly
with a mandate to partner with all of
the firm’s global businesses to drive
products and
grabbed the attention of many in the innovation, serve clients and capture services that
financial industry, the reality is that
Goldman Sachs has always been one
emerging opportunities related to climate
transition and inclusive growth. make sense
of the original pioneers of sustainable
finance and envrionmental, social and
“The expertise and insights we can for each of the Measurement and reporting
governance (ESG)-related investing.
They were one of the first banks to
harness for sustainable finance are
different in Investment Banking than businesses and
publish a comprehensive environmental
those in the Global Markets or Asset
Management Divisions, but also
our clients.
policy framework. They also helped
synergistic and incredibly expansive.”
bring one of the first vaccine bonds to
noted Ms. Park. “Our focus is on
market when they led the International
partnering with all of the businesses Political and regulatory
Finance Facility for Immunisation (IFFIm)’s
to deliver our holistic capabilities while
inaugural bond, a US$1 billion 5-year
coming up with the right strategy and
landscape
benchmark issuance, when they were
the right products and services that
founded in 2006 before “social bonds”
make sense for each of the businesses
existed as a discrete concept. And they
and our clients.”
were early innovators in the green bond
and impact investing space.
Taking a leadership role
“In many ways, we have always been at According to Ms. Park and Ms. Mangone,
the forefront of the ESG agenda,” noted many of the group’s businesses are
Kyung-Ah Park, Head of Environmental already ‘leaning into’ the opportunity.
Markets and Innovation in Goldman’s Goldman’s Investment Banking Division
Sustainable Finance Group. “But has brought a number of innovations to
we’re not doing it due to normative the ESG bond market, such as working
considerations and as a way to make with the Government of Ecuador to create
others feel good about us. For us, the world’s first sovereign social bond
sustainability needs to become a core and leading the world’s first dedicated
muscle that we flex to serve our clients climate resilience bond, issued by the
and create sustainable economic value.” European Bank for Reconstruction and
Development (EBRD). Additionally, to help
Focusing on the opportunity alleviate the economic and social impact
Goldman Sachs certainly believes there is of COVID-19, in 2020 Goldman Sachs has
massive value to be created in the space. led over US$20 billion of COVID-related
And it has seen demand for sustainability- bonds globally.

https://www.ft.com/content/ffd794c8-183a-11ea-b869-0971bffac109
1

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Cover story

They also led the first non-profit green “We are fundamentally in a long-term
bond for conservation, bringing together client relationship business. As such, our
both climate and inclusive growth goals. goal is to engage with clients across all
Other divisions have also been pioneers in
renewables — Goldman Sachs Renewable
sectors including those in more carbon
intense areas to help them with their It’s not just
Power Group, a private company managed
by Goldman Sachs Asset Management, is
diversification plans and strategies,”
noted Ms. Park. “That is the right thing
the volume of Chairman’s message
one of the largest owners and operators of
distributed generation solar assets in the
to do to better serve our clients, manage
risk, and help address the climate
requests and
United States and provides risk-adjusted transition. But, ultimately, there will be interest we are
clean energy investment opportunities for
investors.
difficult decisions to decline certain
financings, such as in thermal coal, if getting — it’s
Cover story: Goldman
In his Financial Times editorial, Mr.
clients do not diversify.”
also the depth Sachs: Leading towards
Solomon notes his organization’s
leadership in structuring the world’s
What makes a leader? and complexity a sustainable future
first‑ever general sustainability
performance linked corporate purpose
Our conversation with Ms. Park and
Ms. Mangone suggest Goldman of the challenges
bond for an Italian multinational energy
company. Simply put, the bond offers
Sachs’ growing success in the market
is influenced by three key aspects:
our clients are
investors an extra 25 basis point coupon leadership, collaboration and expertise. trying to solve. New models for an ESG-
aware financial system
if the company fails to meet its stated The leadership shown by Goldman’s
sustainability key performance indicator executives and management teams
(KPI) goal (which is to have renewables is famous. For his part, Mr. Solomon
be at least 55 percent share of its installed spearheads his own firm’s actions
power capacity by the end of next year). on the climate and inclusive growth
“The markets really embraced that agendas. In 2019, Goldman announced
deal because it shows the company new hiring goals for all analysts and
Measurement and reporting
has a holistic, sustainable strategy,” all entry-level associates as well as a
noted Ms. Mangone. “Investors were requirement to interview two diverse
attracted to the very tangible covenant qualified candidates for each open
that showed the company had skin in the role where available in an effort to
game. And they also wanted to invest increase the representation of all diverse
in a company that is at the forefront of professionals across seniority levels.
the climate transition, taking measurable Mr. Solomon also announced in January Political and regulatory
steps to become more resilient and drive that the firm will only underwrite initial landscape
stronger growth.” public offerings (IPOs) in the US and
Europe for companies with at least
While the firm is clearly focused on one diverse board member, rooted
becoming a steward for companies in Goldman’s commitment to driving
moving towards the low-carbon economy inclusive growth through their work with
and driving inclusive growth, leadership clients. In addition, under Mr. Solomon’s
is also clear that they will not simply leadership, the firm has joined the UN’s
abandon their carbon-intensive clients. Climate Finance Leadership Initiative
“The world will continue to produce and and serves as a founding member of the
use fossil-based fuels, airplanes, cars Climate Leadership Council.
and industrial goods,” acknowledged
Mr. Solomon. “And Goldman Sachs will The Sustainable Finance Group also has
continue to support clients in transactions the support of the firm’s most senior
that are important to economic activity.” business leaders from across the globe.
The Investment Banking Division,
However, the firm is also very clear that recognizing that sustainability is a core
their plan is to help these clients move part of their clients’ agenda, formed a
through the climate transition in a way that dedicated Sustainable Solutions Council.
allows them to achieve sustainable growth. The group is responsible for coordinating
In large part, this is because Goldman across industry and product disciplines
Sachs’ own internal research and analysis globally to drive content and innovation
suggests that some industries — such as with client coverage professionals,
coal-fired electricity generation facilities — to help provide corporates with the
are simply no longer economically viable most comprehensive sustainability
over the long‑term. expertise available, and to capture

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Cover story

opportunities in this fast-growing capabilities at Goldman Sachs. These Contributors

segment across financing and advisory. insights, combined with our collective
The Global Markets Division and experience working with clients, helps
Goldman Sachs Asset Management also us to understand the link between
recently launched their own respective sustainability and performance. In a
Sustainable Solutions Councils, made up world where sustainability is mainstream
Chairman’s message
of traders, investment professionals and but messy, our approach centers
others to share expertise on sustainable on having knowledge and data to Kara Mangone
finance and investing, as clients search concretely understand the path forward Goldman Sachs
for ways to achieve climate-change for our clients and markets.” added Kara is Chief Operating Officer of
investment commitments. Ms. Mangone. the Sustainable Finance Group,
which is responsible for partnering
“Within every division and in every
We can do this together with the firm’s businesses to drive Cover story: Goldman
market, we have leaders that are really sustainability-related commercial Sachs: Leading towards
engaged and focused on driving this into While Goldman Sachs’ vision is to activity. This includes helping
become the ‘go-to’ financial institution to deliver leading expertise and
a sustainable future
everything we do for our clients,” added
Ms. Park. for sustainable finance, the organization capabilities to Goldman Sachs’ clients
also recognizes that supporting an orderly across sustainable growth themes as
That has allowed the Group to encourage climate transition in an inclusive way well as driving innovation.
the second key aspect: collaboration. cannot be achieved through the efforts of
Rather than trying to dictate the rules one single firm. New models for an ESG-
of the game to the businesses, the aware financial system
Sustainable Finance Group works Particularly in areas such as measurement,
hand-in-hand with them to develop disclosure requirements and evolving
and understand the ‘natural roots’ of policies, the firm is actively working
sustainable finance within each of the with a range of stakeholders — even Kyung-Ah Park
divisions. What are the touchpoints? competitors — to help create some clarity Goldman Sachs
Where are the opportunities? What are and standardization around the global Kyung-Ah is Head of Environmental
the tough questions? approach to ESG and sustainable finance. Markets and Innovation in the
Sustainable Finance Group. In this
Measurement and reporting
“We always want to be in a place where “We see a lot of opportunity to work capacity, she works closely with the
our colleagues — whether investment with various stakeholders to help move firm’s global business on driving market
bankers or investors — want to bring us in the market to a positive place in certain solutions and innovative financings
core areas that are particularly relevant to across sustainability and leads the
because they understand the commercial work on climate transition.
value that our perspective can provide,” achieving some of these important global
noted Ms. Mangone. goals,” added Ms. Park.
Political and regulatory
This requires deep expertise — the As Mr. Solomon noted in his editorial, landscape
third key ingredient to Goldman Sachs’ “There is not only an urgent need to act,
success. The firm has been clear that but also a powerful business and investing
they expect their effort to be grounded case to do so. That gives me hope for
in a core economic view that is based what we can achieve and conviction that Jitendra Sharma
on historical research and future growth financial institutions can play a critical role.” KPMG in the US
expectations. “We are fortunate to E: jitendrasharma@kpmg.com
Goldman Sachs is certainly ‘leaning in’ to
have world-class research and analytics Jitendra is the Global Head of Risk
play their part. Consulting for KPMG International and
Financial Services Advisory Lead in
KPMG in the US. He is an advisor to
many leading global banks, including the
Helping SME through COVID-19 Global Lead Partner for Goldman Sachs.
Additionally, Jitendra advises multi-lateral
Goldman Sachs believes small business owners and start-up entrepreneurs fuel
financial institutions for risk and capital
the engine of local and national economies all over the world. COVID-19 is putting management, governance, strategy,
extraordinary pressure on all of society, and they believe they have a responsibility analytics, and infrastructure issues.
to help. For small businesses, Goldman Sachs developed a US$525 million
Small Business Stimulus Package that includes US$500 million to provide
emergency loans to small businesses across the US, and US$25 million in grants
to Community Development Financial Institutions (CDFIs) and other mission-driven
lenders. They’re also providing an additional US$25 million commitment
through their Goldman Sachs Gives COVID-19 Relief Fund to support healthcare
organizations, frontline responders, and the hardest-hit communities. To further
encourage giving toward relief efforts, they’ve also established a special matching
gift program for their people, up to a total of US$5 million.

11 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

The COVID-19 Chairman’s message

evolution of Cover story: Goldman

Sachs: Leading towards
a sustainable future

capitalism
Tania Carnegie, KPMG in Canada
New models for an ESG-
aware financial system

C
OVID-19 demonstrates the importance Measurement and reporting
of defining a ‘new reality’ for investing,
and  highlighting the importance of
delivering societal impact beyond financial
returns.
Political and regulatory
landscape

12 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Significant momentum has been building Some of these investors are going even
over the past year towards the shift to further, seeking out opportunities to
stakeholder capitalism. The COVID-19 invest in companies based on the positive
outbreak demonstrates the importance
of defining a ‘new reality’ for investing,
impact they are able to create through
the solutions their products and services
As we continue
and highlighting the importance of
delivering societal impact beyond
provide to social and environmental
challenges.
to navigate Chairman’s message
financial returns. Welcome to the era of
Many large financial institutions are
the uncharted
enlightened capital.
Over the past few months, we have seen
responding to investor demand.
Goldman Sachs announced in late 2019,
waters
several calls to action make their way for example, that they would channel presented by
Cover story: Goldman
onto executive and board agendas, driven
in part by efforts such as the new Davos
US$750 billion towards investments
related to climate and inclusive growth1. COVID-19, there Sachs: Leading towards
manifesto, and the August 2019 letter
from the Business Roundtable redefining
BlackRock — already a leader in
sustainable investing — announced in
are important a sustainable future
the purpose of the corporation. January the launch of its Global Impact
Equity Fund as part of its efforts to
lessons fueling
As a result, the business community
has been placed under increased
increase sustainable assets in its portfolio the momentum
scrutiny. Stakeholders want to know how
to US$1 trillion2.
for impact and New models for an ESG-
they are adapting their business models Private equity, hedge fund managers, aware financial system
to create value for business and society infrastructure and real estate investors ESG as the
over the long-term. It is a shift away from
shareholder primacy which serves to
are also getting in on the action.
KKR, for example, recently closed its new normal in
broaden the way companies incorporate
stakeholder needs as part of business
US$1.3 billion Global Impact Fund.
TPG and Bain Capital are preparing to
investing.
decisions. close their second impact investing
funds. In February, the Carlyle Group Measurement and reporting
COVID-19 exemplifies the interdependent
announced their thematic approach to
relationship a company has with the
investing with impact across the firm.
community it serves, and highlights
Many long-standing, dedicated impact
the prominent role that impact and key
investment managers, such as LeapFrog
environmental, social, and governance
Investments and BlueOrchard (recently
(ESG) factors have in contributing to the
acquired by the Schroders Group) are also
resilience of a business. As we continue
increasingly active. Political and regulatory
to navigate the uncharted waters, landscape
there are important lessons fueling the KPMG professionals’ conversations
momentum for impact and ESG as the across the financial services sector
new normal in investing. suggest we are in the midst of a massive
shift as investors seek to deploy capital
Investors drive change in opportunities that provide the desired
Investors play a critical role in driving the risk/return profile alongside impact.
shift to stakeholder capitalism. Indeed, Even casual observers can see that the
there are now a growing number of impact investing market is heading for
retail and institutional investors actively continued growth.
scrutinizing companies based on the way COVID-19 is resulting in many
they manage ESG risks and opportunities re-examining both their core values
related to their operations. and the factors that drive value in a

https://www.reuters.com/article/goldman-sachs-environment/goldman-sachs-pledges-750-billion-to-
1

environmental-causes-by-2030-idUSL1N28Q0RL
https://www.ft.com/content/57db9dc2-3690-11ea-a6d3-9a26f8c3cba4
2

13 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

business. A number of these factors are Enhanced communication — around impact is by managing
consistent with the attributes of impactful supported by credible data and it as part of ownership of the
companies, including an organization’s evidence — is essential. asset. Impact metrics can
agility, culture, employee and brand be leveraged to drive better
— Incorporate independent voices.
loyalty. The intentionality of the positive operational decisions that
With concerns circulating
impact it has on stakeholders is critical, in help achieve impact where it’s Chairman’s message
about ‘impact washing’, the
particular the solutions it offers to societal intended, as well as enhance or
involvement of independent
challenges through its business model. create new value.
advisors with the design of
Many are now asking how can your impact approach can — Assess the net impact. While
businesses adapt, and do things bring comfort to investors, the intention of impact investing
differently in the future to maintain these in particular as you work to is to always generate a positive
gains and emphasize these attributes as establish impact expertise on impact, the reality is that — Cover story: Goldman
we emerge from COVID-19? How can your team. A number of fund sometimes — there can be Sachs: Leading towards
this be more broadly incorporated into managers are also incorporating unintended consequences that a sustainable future
investment objectives? impact assurance as part of their also need to be considered.
year-end process to provide Investors are increasingly asking
Build trust to build Assets Under investors with an independent about the ‘net’ positive and
Management (AUM) perspective over the way they negative impacts associated
Another imperative highlighted by are executing their approach. with their investments.
New models for an ESG-
COVID-19 is trust. While many investors 2. Authenticity and integrity aware financial system
are embracing the pursuit of impact
Look ahead
as part of their investment approach, — Share perspectives. Our There should be no doubt that impact
some are skeptical absent a standard conversations with investors will play a significant role in financial
measurement approach, and definitions suggests they want to services in a post-COVID-19 world with
that govern impact. know how perspectives its appeal to a broader range of investors
and experience are being beyond those who identify as impact
Our view suggests that, if financial incorporated and that their investors. With the increasing number
institutions want to scale up their impact financial institutions are iterating
Measurement and reporting
of businesses that identify as purpose-
products and attract more investment their approach as the market driven, and the momentum building
capital, they will need to focus on evolves. to establish standards around ESG
improving trust. Furthermore, our and impact frameworks and metrics,
experience supporting the growth of — Demonstrate intent. Financial
institutions are increasingly the work of asset managers and asset
impact investing suggests there are three owners will become easier.
broad areas where financial institutions being asked to demonstrate
their wider commitment and Political and regulatory
should be focusing in order to help drive While we encourage financial institutions
ability to contribute measurable to focus on building trust with their landscape
investor engagement and build trust.
impact at scale alongside clients and investors, we also advocate
1. Transparency and disclosure financial returns. Investors want continued cooperation at the industry
to know how the general partner level. Indeed, it will take concerted
— Don’t underestimate the
sees the potential for impact efforts across the impact investing
importance of communication.
investing more broadly at their ecosystem if the industry hopes to drive
Investors want more than just
firm beyond a niche fund. growth in this market.
financial reports; they want to
understand the rationale behind 3. Integration of impact Considering impact as part of investment
their fund manager’s approach decisions is the future of finance.
to impact and their plans for — Don’t just measure impact,
manage it. A core way to Welcome to the era of enlightened
continuous improvement. capital.
demonstrate intentionality

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

COVID-19 exemplifies the

interdependent relationship Chairman’s message
a company has with the
community it serves, and
highlights the prominent role Cover story: Goldman
that impact and key ESG Sachs: Leading towards
factors have in contributing to a sustainable future

the resilience of a business.

New models for an ESG-
aware financial system

Measurement and reporting

Contributor

Political and regulatory

Tania Carnegie landscape
KPMG in Canada
E: tcarnegie@kpmg.ca
Tania is Leader and Chief Catalyst
of the Impact Ventures practice at
KPMG in Canada. As a recognized
global leader in impact investing,
she created both these roles and is
responsible for devising and bringing
to life KPMG’s impact strategy and
for advising clients on developing
strategies that leverage impact as
a means to drive long-term value
creation.

15 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Embedding Chairman’s message

ESG into banks’ Cover story: Goldman

Sachs: Leading towards
a sustainable future

strategies
Dr. Niven Huang, KPMG in Taiwan
Arnaud Van Dijk, KPMG in Canada
New models for an ESG-
aware financial system

Steven Hall, KPMG in the UK

Julie Patterson, KPMG in the UK
Measurement and reporting

I
n the “new reality” that will follow
COVID-19, sustainability will be the mantra.
Are banks ready?
Political and regulatory
landscape

16 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

In just a matter of weeks, COVID-19 COVID-19 economic crisis started. The

has changed the dynamics of the global MSCI World ESG Leaders Index, for
economy. As the crisis unfolded, many example, outperformed the regular index
businesses and investors shifted their
focus from profits to people; human
by 1.36 percent on the quarter. According
to Morningstar, 70 percent of responsible As the world
impact became more important than
economic impact. Issues related to human
investment funds outperformed their
peers in the first quarter1.
starts to Chairman’s message
equality, access to health services and
societal welfare topped the agenda. It
At the same time, banks are also starting look to the
quickly became clear that the environment
to feel pressure from their customers and
from the public at large. Customers want to
future, expect
and social issues have a deep and direct
influence on economic stability.
bank with a firm that reflects their views and regulators,
beliefs; younger generations, in particular, Cover story: Goldman
At the same time, the economic contagion are said to be choosing their bank based on oversight Sachs: Leading towards
that followed seems to have infected the
carbon economy the hardest. Oil prices
their ESG credentials.
authorities a sustainable future
plummeted on historically low demand.
Carbon-intensive industries — everything
Facing the tough questions
and policy
from airlines to mining — either shut
down or greatly reduced operations. Cars
Bank CEOs know they need to act. In fact,
in a global survey conducted by KPMG makers to
remained parked in driveways.
International in the autumn of last year
(before COVID-19), almost three‑quarters
become more New models for an ESG-
aware financial system
For a time, the immediate health and
economic crisis pushed the sustainability
of banking CEOs said they believed their
future growth will be largely determined
vocal about
agenda to the back-burner. However, by their ability to anticipate and navigate the need
our view suggests that — in the “new
reality” of the post-COVID world —
the shift to a low-carbon, clean-technology
economy2. However, most were struggling for greater
environmental, social and governance
(ESG) will increasingly become central to
to come to grips with what that really
means for their bank going forward.
adoption of Measurement and reporting
the economic equation.
Take the transition risk, for example. Bank ESG.
executives understand the “new reality”
Pressure for sustainability rises
will require them to pivot their finance
As the world starts to look to the future, towards greener and more sustainable
expect regulators, oversight authorities companies and investments. But they also
and policy makers to become more vocal know they can’t just flick a switch; they
about the need for greater adoption
Political and regulatory
still have significant books of business
of ESG. They recognize that moving wrapped up in loans and instruments to landscape
towards a low-carbon economy will ‘brown’ assets. As long as those brown
create additional complexities for financial assets continue to generate profits for
services firms. And they are worried that the bank, bank executives will need to
banks are ill-prepared for the types of balance their duty to finance the ESG
prudential and conduct risks that could transition against their fiduciary duties to
arise — both in terms of the direct risks shareholders.
(i.e. the physical impact of climate change
on assets) and the transition risks (i.e. the Banks, regulators and politicians are also
challenges inherent in a wholesale move struggling to understand all of the potential
towards a low-carbon economy). unintended consequences of their shift
towards more ESG-related business
Investors will also be ramping up pressure
strategies. Declining to renew loans on
on banks. In part due to the increasing
existing coal mines, for example, may
recognition that ESG factors, and climate
improve a banks’ carbon disclosures. But it
change in particular, represent material
could lead to significant social implications
risks that must be managed.
as mines close and unemployment grows
Investors also want to ensure they (which, in turn, would have a massive
can continue to earn a return on their impact on that market’s retail lending
investment. Interestingly, recent data and potential impairments). Having the
suggests that ESG-related funds experience, insight and data to map all
outperformed the markets over the those potential consequences is proving to
first quarter of the year — when the be a challenge.

https://www.investmentexecutive.com/inside-track_/dustyn-lanz/esg-and-covid-19-four-market-trends/
1

CEO Outlook 2019, KPMG International, 2019

2

17 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

The leaders move forward new sustainable banking and investing

products and services, such as green
Many banks were already moving down home-improvement loans, carbon neutral
the path towards greener finance. The
quantum of ESG-related announcements
banking and sustainable exchange-traded
funds (ETFs), aimed at millennials; and Leading banks
coming out of banks before COVID-19
were staggering. Goldman Sachs, for
capital markets are moving towards
‘green underwriting’. Many bank
recognize that Chairman’s message
example, announced they would spend
US$750 billion on sustainable finance over
customers (commercial and retail) can
now choose from a variety of ESG-linked
sustainability
the next decade. Bank of America pledged
US$300 billion to sustainable investments3.
funds, bonds and assets. is an issue
Virtually every large global bank has made Commercial banks are also creating that requires
some sort of commitment — both financial new products and testing new Cover story: Goldman
and otherwise. models. For example, UK firm, Britvic, industry- Sachs: Leading towards
What is notable about these
recently refinanced its GBP400 million
(US$520 million) loan facility with wide (indeed, a sustainable future
announcements is not just the sheer size
of the commitments. It is who is making
several commercial banks through a
sustainability-linked deal that offers the
financial
the statements. The Goldman Sachs
pledge was made by David Solomon
company lower rates if they meet their
various ESG targets4. It is certainly not
system-wide)
(the global CEO). At the Bank of America
it was the Vice Chairman of the global
the first loan to be linked to sustainability collaboration New models for an ESG-
aware financial system
bank. The point is that the leaders are
criteria. And all signs suggest it will not
be the last. and response.
making ESG a CEO-level and Board-level
mandate; they are elevating the issue to Interestingly, the leading banks also seem
the highest levels of the organization. to recognize that sustainability is an issue
that requires industry-wide (indeed,
While COVID-19 may have slowed financial system-wide) collaboration and
progress somewhat, it is clear that response. And they are working with a
banks continue to embrace the ESG
Measurement and reporting
range of organizations to progress key
agenda. New products and new models aspects. A third of the largest banks
are continually being developed, tested globally have signed up to the Principles
and commercialized. Wealth managers for Responsible Banking. Many are
are moving towards ESG-informed participating in regulatory discussions
investing; retail banks are creating around taxonomy and green finance.
Political and regulatory
landscape
3
https://www.cnbc.com/2020/01/24/climate-crisis-investors-putting-money-towards-sustainable-future.html
4
https://www.globalcapital.com/article/b1kcxskd4hxrqz/britvic-opens-lid-on-sustainability-financing

18 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Supervisors and regulators, in turn, are also working collaboratively Contributors

in groups. The Network for Greening the Financial System (NGFS),
a group of central banks and supervisors, was created to share best
practices around key systemic challenges (such as integrating climate-
related risks into financial stability monitoring and micro-supervision).
Taking ESG seriously Chairman’s message
While some big questions and uncertainties exist, it is clear that bank Dr. Niven Huang
executives can no longer afford to take a ‘wait and see’ approach. KPMG in Taiwan
Public and regulatory expectations are rapidly changing and the most E: nivenhuang@kpmg.com.tw
competitive banks are already moving to take advantage of that Niven is General Manager of KPMG Sustainability
situation. Consulting Co., Ltd. in Taiwan and a pioneer for
promoting CSR, sustainability reporting, SRI, corporate Cover story: Goldman
So what should banks be doing to embed ESG into their strategy? sustainability strategy, and carbon management. Sachs: Leading towards
KPMG member firms’ work with banks and other organizations Before joining KPMG, he was the Secretary General
of the Business Council for Sustainable Development
a sustainable future
across the financial services ecosystem suggest there are four key
in Taiwan and regularly presents on sustainability both
actions that bank executives should be addressing today. within the jurisdiction of Taiwan and internationally.

1. Understand your current baseline. More than simply

quantifying the financial risks and probabilities, banks should New models for an ESG-
create an understanding of common ESG expectations of key
aware financial system
stakeholders and build awareness of leading ESG practices, in
particular among senior management and board members. This
includes taking time to understand their current practices and Arnaud Van Dijk
exposures, including whether they have the right data, the right KPMG in Canada
capabilities and the right processes to monitor and manage ESG E: acvandijk@kpmg.ca
appropriately going forward. Arnaud has more than 11 years of sustainability
consultancy experience in the public and private
sector. Over the course of his career, Arnaud has
Measurement and reporting
2. Know what’s expected. While regulatory and supervisory
gained extensive experience working with leading
authorities are exploring approaches as to how they might provide
companies and institutional investors to strategically
specific targets or expectations, bank executives should be talking address Environmental, Social and Governance
to their regulatory authorities to understand what is expected of (ESG) issues and disclosures.
them and how those expectations may change over the short to
medium-term. They should also be working proactively with their
regulators and authorities to seek out facts, develop standards and Political and regulatory
identify solutions. landscape
3. Put it on your risk radar. For many banks, ESG factors remain
a reputational risk. But they need to be more than that. Bank Steven Hall
executives (and particularly boards) should be ensuring that ESG KPMG in the UK
risks are a lens through which all decisions are made, in particular in E: steven.hall@kpmg.co.uk
relation to credit and valuation risks in their portfolios, reflecting the Steven is a Partner in the risk practice of KPMG UK’s
strategic nature of these risks. financial risk management department. He leads
KPMG’s work on credit risk, counterparty credit risk,
capital management, Basel 2, Basel 3 activities and
4. Develop a strategy. ESG risks cannot be managed off the side IFRS9 ECL risk activities in the UK.
of a desk. It requires banks to develop a robust strategy that is
integrated into the overall business strategy for the organization.
While the strategy must retain a level of flexibility, it must also be
actionable and measurable.
Embrace it
The impact of COVID-19 makes it clear that banks must act to Julie Patterson
embed ESG into their strategies now if they hope to remain ahead of KPMG in the UK
public and regulatory expectations. The reality is that many leading E: julie.patterson@kpmg.co.uk
banks are already taking advantage of the ‘upside’ to execute a Julie has specialized in the asset management and funds
strong and integrated sustainable finance strategy. Those who lag sector for nearly 20 years, having previously worked at
behind face not only increased regulatory and public scrutiny but the UK Investment Association and as a regulator. She
has extensive knowledge of EU regulation and national
also constrained growth.
market structures, produces thought leadership on the
The bottom line is that banks can no longer afford to ignore ESG. evolving regulatory context, and is KPMG’s global lead
Indeed, they must embrace it. on Brexit for the sector.

19 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Preparing for Chairman’s message

climate-related Cover story: Goldman

Sachs: Leading towards
a sustainable future

disclosures
William (Bill) J. Murphy, KPMG in Canada
Arnaud Van Dijk, KPMG in Canada
New models for an ESG-
aware financial system

Measurement and reporting

C
limate change and related risks
have truly significant implications for
underwriting, investment, and even
an insurer’s operational activities.
Political and regulatory
landscape

20 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

How are the TCFD Action is gathering momentum. Some

recommendations impacting major institutional investors, for example,
insurers? are making bold moves. BlackRock CEO

Ever since the formation of the Task Force

Larry Fink has put climate change at the
center of his firm’s investment strategy,1
Today, more
on Climate-related Financial Disclosures
(TCFD) in 2015 and the publication of their
while Goldman Sachs has pledged
US$1 trillion of financing and investment
than 900 Chairman’s message
first set of recommendations 2 years later,
there has been rapid and significant buy-in
in areas that focus on climate.2 organizations
from organizations across the financial The TCFD pillars support the
services spectrum.
This is as it should be — climate change
Today, more than 900 organizations
support the TCFD publicly, with the
TCFD publicly,
Cover story: Goldman
risks are increasingly recognized as one recommendations becoming the global with the Sachs: Leading towards
of the key issues facing economies standard for climate-related disclosures.
and communities today. Climate risks The rationale is clear. As TCFD chair recommendations a sustainable future
have been identified by the World
Economic Forum as the top threat facing
Michael Bloomberg put it, “increasing
transparency makes markets more becoming the
us for the past 4 years consecutively,
with WEF recently making the critical
efficient, and economies more stable and
resilient.3”
global standard
observation that “climate change is The TCFD recommendations consist of for climate-related New models for an ESG-
striking harder and more rapidly than aware financial system
many expected.” COVID-19 highlights
four pillars — governance, strategy, risk
management, and metrics and targets —
disclosures.
that natural processes can create with suggested disclosures against each
previously unimaginable economic and one. There isn’t space to go into detail on
social disruption, whether abruptly or each of these here, but suffice to say they
cumulatively. pack a punch.
Measurement and reporting

Four pil ars of the Task Force on

Climate-related Financial Disclosures Political and regulatory
landscape

Governance Strategy Risk Metrics and

management targets
Disclose the Disclose the actual Disclose how Disclose the
organization’s and potential the organization metrics and
governance impacts of climate- identifies, targets used
around climate- related risks and assesses, and to assess and
related risks and opportunities on manages climate- manage relevant
opportunities the organization’s related risks climate-related
businesses, risks and
strategy, and opportunities
financial planning where such
where such information is
information is material
material

Source: https://www.fsb-tcfd.org

1
https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter
2
https://www.ft.com/content/ffd794c8-183a-11ea-b869-0971bffac109
3
https://www.fsb-tcfd.org/

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Take this 22 word recommendation in the In some instances, there could be an temperature increases, with corresponding
Strategy pillar: “Describe the resilience opportunity to expand their coverage — increases in the range and transmission
of the organization’s strategy, taking into such as offering insurance against rates of infectious diseases could have
consideration different climate-related over-land flooding once they develop the unexpected mortality and morbidity
scenarios, including a 2°C or lower necessary data sources and underwriting impacts. Insurers need to proactively
scenario.” This arguably represents the models. However, in the case of other model such scenarios, rather than waiting
Chairman’s message
most complex disclosure recommendation specific risks and geographies, they for the trends to appear in statistical tables.
ever made. For example, with no historical may have to scale back coverage — for
data to reference against, no commonly example, in California where offering A life insurer may also have a large
agreed set of climate scenarios/pathways fire risk cover has become increasingly presence in the group benefits space,
nor consistency in methodologies for problematic. providing cover for groups of corporate
the assessment and quantification of employees for medical care, dental care
climate-related impacts (e.g. how to The TCFD recommendations ask them and more. There could be unanticipated Cover story: Goldman
integrate climate science, macroeconomic to categorize and report on exposures second or third order impacts here as Sachs: Leading towards
and actuarial models) fulfilling this to both acute risks (e.g. the increasing well. For example, might climate change a sustainable future
requirement poses a huge challenge. frequency and severity of hurricanes) cause some naturally-sourced raw
Again, COVID-19 will provide relevant and chronic risks (such as the ‘compound materials in medicines to become scarcer
reference points for assessing a sustained extremes’ that we are seeing in Australia, and therefore drive up medication costs?
decline in the global economy. where bushfires have been followed How should insurers factor this in and
by flooding from tropical storms,4 avoid experiencing losses? New models for an ESG-
What does this mean for insurers? or longer term trends like increased
There has been an emerging trend aware financial system
home break-ins as a result of repeated
Clearly, insurers recognize that climate Australian heatwaves5). Sophisticated toward offering long-term care coverage.
change and related risks have truly use of big data will increasingly be These may be hybrid products with a life
significant implications for their needed in their analyses to identify insurance component. Premiums may
underwriting, investment, and even unexpected correlations. be for the life of the policy or to a fixed
operational activities. The TCFD anniversary date/age, with multi‑year
recommendations mean that all — A slow-down for motor? premium guarantees and return of
categories of insurers have issues that premium on death options. Again,
Measurement and reporting
Consideration of transition risks will be
they need to grapple with and resolve. insurers will need to think through the
particularly important for the automotive
insurance business. Consider that, with possible impacts of climate change on
Of note, the TCFD also provides life expectancies, health outcomes and
supplemental guidance for insurance the widespread push towards lower
carbon economies, the types and usage covered expenses when structuring and
companies and asset owners that will pricing these products.
need to be taken into account. of vehicles will change. The increasing
use of shared transport modes will — Investments under scrutiny? Political and regulatory
— P&C with questions to ponder create a need for more use-based landscape
policies (‘pay as you go’ insurance) Then there is the investment side.
Let’s take property and casualty (P&C) Insurance companies are major
rather than time-based (paying a fixed
insurers first. While they are already well institutional investors in their own right.
annual premium).
aware of climate perils, they need to While there is no prescription in the
better assess and explain their strategies Meanwhile, with autonomous vehicles TCFD recommendations on what stocks
for a changing climate, making clear how coming down the track, questions of or activities it is acceptable to invest in,
they are addressing them and showing liability for accidents will pressingly need there is supplemental guidance under
how resilient their portfolio is over to be resolved. the Metrics & Targets pillar for asset
various time horizons. owners to disclose the carbon footprint
The TCFD recommendations would of their investment portfolios. Although
They need to ensure that the expected expect — disclosures of the strategic the TCFD acknowledges that a carbon
impacts of climate change are reflected implications of such trends where material. footprint does not necessarily represent
in their actuarial models — which means
— A complicated life a risk measure, and is subject to various
thinking about such issues as whether
data and methodology constraints, such
adjustments will be necessary to the
For life insurers, there may on the face disclosures could inevitably lead to a
coverages they offer, whether their pricing
of it appear to be a lower potential greater focus and increased questioning
structures need to change, and whether
impact — but still there are important on whether an institutional investor is
they need to reconsider their commercial
issues to think about. Chronic physical putting its money behind green and
exposures to certain industry segments.
risks such as unprecedented average sustainable businesses and enterprises.

4
https://www.nytimes.com/2020/02/23/world/australia/climate-change-extremes.html
5
https://www.insurancejournal.com/research/app/uploads/2018/08/IAIS_and_SIF_Issues_Paper_on_Climate_Change_Risks_to_the_Insurance_Sector_-1.pdf (see page 18).

22 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Challenges on the road ahead — Second and third-order impacts Contributors

So, where does all this leave insurers and Reporting is one challenge, but there
what does the journey ahead look like? are others. As we have seen, identifying
In short, it could soon begin to get much second and third-order impacts of
harder. climate risks is critical but hard to do.
Insurers need to look across all the Chairman’s message
Could the recommendations become outcomes that could occur from climate
mandatory? change — not predicting which scenario William (Bill) J. Murphy
is most likely to happen, but identifying KPMG in Canada
At the moment, theTCFD recommendations E: billmurphy@kpmg.ca
the possibilities and considering how
are voluntary — but Mark Carney Bill is KPMG in Canada’s National
resilient their strategy is across multiple Climate Change and Sustainability
and others have indicated that they
would like to see them become
warming and transition scenarios. Then leader and a Partner in Governance Cover story: Goldman
insurers and reinsurers need the agility & Risk Management. He is also Sachs: Leading towards
mandatory, especially in regulated
to adapt strategies and coverages as the Chair of the Canadian firm’s Global
sectors.6 Securities regulators and Audit Growth work stream and the
a sustainable future
likely path becomes clearer over time.
stock exchanges are taking TCFD very Senior Advisory and Assurance
seriously, alongside industry regulators. — Questions of philosophy Services Partner on multiple key
global and national accounts.
Financial sector regulators tend to But another major challenge is almost a
focus on stress testing — requiring philosophical one. In 2019, there were
New models for an ESG-
companies to model the impacts of global losses of around US$150 billion
from catastrophic events — but only aware financial system
a single event at a point in time. The
TCFD recommendations, however, US$50 billion of that was covered by
place more emphasis on the broader insurance.7 Are we, as societies, happy
concept of scenario analysis — where that up to two-thirds of these costs are
Arnaud Van Dijk
businesses need to model the effects effectively covered by governments KPMG in Canada
of multiple variables over an extended (and so, taxpayers) through emergency E: acvandijk@kpmg.ca
period of time. This is a more challenging funding? Are we prepared as individuals Arnaud has more than 11 years
to directly or indirectly bear these of sustainability consultancy
Measurement and reporting
proposition.
growing uninsured losses? Given the experience in the public and private
If voluntary TCFD implementation unprecedented government debt being sector. Over the course of his
gathers pace and regulators in fact get incurred during COVID-19, will there be career, Arnaud has gained extensive
experience working with leading
behind making TCFD mandatory, then any taxpayer capacity to continue to do companies and institutional investors
we could see a significant acceleration so? to strategically address ESG issues
in timelines. Many clients are currently and disclosures. Political and regulatory
working on a 3-year-plus timeline for This is a question that is likely to come
implementation of TCFD — focusing first increasingly into focus in coming years landscape
on qualitative disclosures, with scenario as climate change impacts grow. As
analysis disclosures further down the an industry, insurers need to be on the
track. They would need to accelerate front foot, engaging with governments,
their programs significantly if regulators regulators and stakeholders, providing
up the tempo. product innovations, and supporting
clients and broader communities.
Location of disclosures also matter.
Currently, reporting is voluntary and is As with the battle against climate change
generally a hybrid of detailed disclosures itself, there is plenty for insurers to do
in a sustainability report and summary and only limited time.
information in the annual report.
Mandatory disclosure would likely see
more length and detail having to be given
in annual report.

6
https://www.fsb-tcfd.org/
7
Tropical cyclones causing billions in losses dominate nat cat picture of 2019. (2020, January 08). MunichRe

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Diversity and tax Chairman’s message

become key Cover story: Goldman

Sachs: Leading towards
a sustainable future

components of ESG
Minh Dao, KPMG Australia
Mark Spicer, KPMG Australia
New models for an ESG-
aware financial system

David Neuenhaus, KPMG in the US

Measurement and reporting

W
e have begun to see
a broadening of the
constituent issues that
comprise environmental, social
Political and regulatory
and governance (ESG) agendas — landscape
such that factors including tax
transparency and diversity have
become ever more embedded.

24 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Financial institutions are Many policymakers know they need to

extending their influence to drive act. And there is growing momentum
positive change among investors, asset managers and

ESG agendas have shot to the fore in

insurers to encourage a shift to sustainable
investment assets. So institutional The benefits of
the last couple of years, with investors
across the institutional base increasingly
investors and asset managers such as
BlackRock are making sustainability their
diversity can Chairman’s message
using them to drive positive change. This
extends far beyond ensuring their own
“new standard for investing”, some global
banks have said they won’t lend to new
reach further
internal compliance, becoming an active
mechanism to influence the governance
assets in certain fossil fuel classes, and a than top-line
and choices of their investees too.
growing number of insurers are moving
away from underwriting new assets that performance — Cover story: Goldman
As discussed at KPMG’s 8th annual
Global Sovereign Wealth and Pension
are not ‘clean’.
affecting issues Sachs: Leading towards
Funds Tax conference in September
2019, institutional investors are now
Crucial as it is, ESG is about more
than the ‘E’ element. And, indeed, we such as health a sustainable future
driving positive ESG practices in their
business decisions.
have begun to see a broadening of the
constituent issues that comprise ESG
and safety, which
Why this is happening now is a complex
agendas — such that factors including
tax transparency and diversity have
is a key facet of
question, a discussion of which could
probably fill a whole publication in
become ever more embedded. the social pillar. New models for an ESG-
aware financial system
itself. There is growing conviction in The diversity business case
boardrooms that these issues have Taking diversity first, the debate has
become core to brand integrity and moved beyond whether it is the ‘right’
investability, at the same time as political thing to do to foster diverse boards and
and regulatory impetus for change has workforces — to an acknowledgement
been strengthened. Simultaneously, there that there is a direct commercial case for
has been a shift in the attitudes of many Measurement and reporting
doing so. The body of empirical evidence
consumers who are putting ever greater that more diverse organizations perform
emphasis on issues of sustainability and better is considerable.
ethical integrity. Meanwhile, a new young
generation — spearheaded by figures Investors are now upping the agenda
such as Greta Thunberg — is becoming by expecting the entities they invest in
increasingly vocal over concerns about the to embrace this too. In fact, some fund
climate change risks facing our planet. managers were unequivocal, stating that Political and regulatory
their research shows that companies landscape
Now, more urgent than ever, as the with diverse boards “are more likely
world comes to terms with COVID-19, to achieve superior financial
corporate values and attributes that performance.1” As a result, they are
provide support to societies and prepared to use their shareholder voting
communities will be of the utmost powers to encourage it.
importance. COVID-19 could cast a
new perspective on the fundamental The benefits of diversity can reach
significance of ESG activities. further than top-line performance —
affecting issues such as health and
Prior to COVID-19, it was the ‘E’ of safety, which is a key facet of the social
ESG that was on everybody’s lips. It pillar. A global mining giant, for example,
was a dominant theme at this year’s discovered that the more diverse its
World Economic Forum in Davos. workforces were in its sites across
While COVID-19 may currently be Australia, the better the health and
overshadowing the climate risk agenda, safety results. Those sites with a higher
there is no doubt that it will come back, proportion of women tended to have
particularly as many countries have fewer incidents and accidents, as well as
experienced the unintended climate better employee engagement generally.
benefits of cleaner air and water
during the COVID-19 shutdowns.

1
https://cdn3.cppinvestments.com/wp-content/uploads/2020/05/CPP-Investments-2019-sustainable-investing-
report-v5-en.pdf

25 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Paying a ‘fair share’ of tax

The Organization for Economic
Co-operation and Development (OECD)
Crucial as it is, ESG is about drive to create greater tax transparency,

more than the ‘E’ element. with country-by-country reporting rules

and a much tighter anti-avoidance agenda, Chairman’s message
And, indeed, we have begun along with local measures from national
tax authorities, have put the spotlight on
to see a broadening of the tax as one of the moral issues of our time.
After all, revenue authorities collect taxes
constituent issues that comprise for governments to invest in hospitals,
Cover story: Goldman
ESG agendas — such that factors schools and roads, creating the social
infrastructure that improves the lives of Sachs: Leading towards
including tax transparency and communities and nations. The effect of
COVID-19 on economies around the world
a sustainable future

diversity have become ever more greatly heightens this issue: as economies
rebuild, tax contributions from corporates
embedded. are critically important. We can expect
there to be zero tolerance of businesses
seen to be avoiding paying their ‘fair share’.
New models for an ESG-
aware financial system
Tax has become a key component in the
‘S’ of ESG and it also plays a significant
part in the ‘G’. For example, tax paying
entities are becomingly increasingly
focused on having the appropriate tax
risk management and governance
framework to ensure material tax Measurement and reporting
risks are elevated to the board for
consideration.
There is a careful balance to be struck,
of course. Tax is one of many factors
which an investment committee must
consider when assessing the return on Political and regulatory
investment. In a competitive bid context,
landscape
taking too conservative a tax position
may lose you the bid, take too aggressive
a tax position and you may end up in
dispute with the tax revenues.
Institutional investors are also
increasingly asserting their influence
in portfolio companies to adopt tax
risk management and governance
frameworks similar to their own. It
will be fascinating to see whether this
spreads into the public company domain,
where it is much harder to do given
the challenges of obtaining sufficient
shareholder backing.

26 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Tax incentives — from carrots to most frequent yardstick, but it is only Contributors
sticks? one measure. With so much value at
risk, an acceleration in the development
Tax is certainly not confined to social of investment ready tools which
and governance aspects, however: it is reflect climate risk and can be applied
becoming steadily more embedded in consistently is needed.
environmental questions too. Discussion Chairman’s message
around carbon taxes as a way of driving Conclusion
decarbonization has been growing in Minh Dao
All of these factors point to one KPMG Australia
recent times. E: mdao@kpmg.com.au
conclusion — tax and diversity have
Clearly, tax concessions for green become an integral part of any ESG Minh is an Australian Deals Tax Partner
approach. Just like their backing of and the Asia Pacific Tax Lead for
initiatives are a highly effective lever. In Cover story: Goldman
sovereign wealth funds and pension
the US, one can virtually draw a straight diversity at the board level, including
with respect to gender and the
funds at KPMG. She specializes in Sachs: Leading towards
line between tax credits for renewable infrastructure transactions, including
energy projects and investor interest in requirement for more transparency privatizations, M&A, public private
a sustainable future
them — often leading to partnerships around key statistics and diversity partnerships (PPPs) and renewables.
between developers and non-energy metrics, investors are putting tax at the
investors who had sufficiently big tax heart of their ESG approach.
bases to consume the credits.
As institutional investors and corporates are New models for an ESG-
We have also seen tax concessions becoming increasingly transparent about
their tax policies, making more information
aware financial system
in jurisdictions such as Australia for
investments in ‘clean building’, while in available in the public domain, investors
need to ensure that tax governance is up to Mark Spicer
Canada there are strong enticements to
KPMG Australia
invest in solar power. Most developed scratch in the companies they are invested E: markspicer@kpmg.com.au
economies have a growing array of in. Does a tax governance policy exist? Are Mark joined KPMG’s Sustainability
sustainability incentives. the necessary controls in place to ensure team in 2006. He believes that
it is set up correctly and functioning as the integration of ESG/responsible
But the question arises, with the climate investing as well as the transparent and
Measurement and reporting
intended? How are tax issues escalated
debate gathering urgency, whether the to the the board? Fundamentally, is the robust reporting of ESG performance
time will come to flip the equation — and business paying the appropriate levels of should lead to improved investment
mete out tax ‘punishments’ for those opportunities. Mark works across all
tax and contributing to the public purse elements of the ESG/investment value
businesses who do not pursue or invest in the highly challenged post COVID-19
in more sustainable modes of business? chain.
environment?
Will we see stiffer carbon pricing, and
a form of carbon tax? According to a Some may fear this could lead to an Political and regulatory
recent report from the United Nations increase in ‘green washing’ — presenting landscape
Principles of Responsible Investment this investments and assets as greener than
is one element of “the inevitable policy they are so as to be seen to be ticking
response”. the ethical box. But the likelihood is that
discerning analysts and stakeholders will David Neuenhaus
From that, we can surely expect to see be able to see the difference. KPMG in the US
investment institutions increasing the E: dneuenhaus@kpmg.com
pressure through their ESG policies on Meanwhile, the focus of progressive David is the Global Lead for Asset
portfolio assets to adopt lower carbon, institutional investors is on supporting Management Tax and also for the
more sustainable business models. This fairer, more sustainable and more Institutional Investor network, which
ethical businesses which, they believe, includes sovereign wealth and pension
is at the early stages, however. It remains
funds. He has more than 25 years of
challenging at present for investors to intrinsically offer the prospect of stronger experience providing planning and
understand where the chief climate risks long-term returns. structuring services to asset managers
in a portfolio lie and to evaluate those and institutional investors. David is
Given the economic challenges
risks consistently and objectively across concentrated on advising institutions
presented by COVID-19, this sustainable in relation to US and international tax
different investments. Today’s tools are
value creation will be needed more than matters.
relatively blunt. Carbon intensity is the
ever before.

27 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Creating trust Chairman’s message

in ESG data
Laszlo Peter, KPMG Australia
James O’Callaghan, KPMG China
Cover story: Goldman
Sachs: Leading towards
a sustainable future

Tim Denley, KPMG in Japan

New models for an ESG-
aware financial system

E
verybody is clamouring to embed ESG
criteria into their investment and product
development decisions. And, given the
experiences gained from COVID-19, they
want to be able to verify that data virtually. No Measurement and reporting
wonder banks, insurers and asset managers
are looking for a more effective approach to
collecting and sharing verifiable ESG data.

Political and regulatory

landscape

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

As this edition of Frontiers in Finance carbon footprint of their impact

seeks to make clear, financial services investments. Insurance companies
firms of all shapes and sizes are looking would be free to offer premium
for ways to include a wider range of
ESG data into their decision-making.
discounts to those customers able to
demonstrate certain certifications or Consider what
Some are simply seeking to properly
quantify their broader carbon footprint for
levels of standards compliance.
the world would Chairman’s message
management and reporting. Others are
creating sophisticated new ESG-based
Creating enabling standards and
systems
look like if
products they hope will drive their next
There are two big challenges that must
everyone in a
wave of growth.
The problem is that ESG data — generally
be overcome to achieve this utopia.
The first is to get international standard
value chain — or, Cover story: Goldman
speaking — is inconsistent, poorly verified setting bodies and governments to come more accurately, Sachs: Leading towards
and non-standardized. As yet, there are no
international accounting standards for ESG
together to agree on a consistent global
set of ESG measures and certifications an economic a sustainable future
data; verification and audit approaches
remain inconsistent; few smaller
that could be used by all parties to
measure ESG risk and impact. Progress
community —
companies report any ESG metrics at all. was just starting to be made on this front;
refocusing attention post-COVID-19 may
were able to see
COVID-19 demonstrated further
weaknesses in the collection and sharing
take time. real–time, verified New models for an ESG-
aware financial system
of ESG data. With international travel
halted and jobsites locked down, traditional
The other major challenge is to find
a way to share that data, in real-time,
ESG data on their
verification and audit processes were across all parties in the respective suppliers and
disrupted. Getting verifiable ESG data in
time to make smart investment decisions
economic community. And, recently, we
have started to see some exciting new counterparties. 
became exponentially more difficult. solutions emerge. Perhaps the most
Not surprisingly, many bank, insurance
promising are those enabled by digital Measurement and reporting
ledger technology (DLT).
and asset management leaders are now
increasingly concerned they may not
The rebirth of digital ledgers
have the right data at the right quality and
timeliness to allow them to truly embrace You may know DLT by its most
ESG in the recovery ahead. popular technology — blockchain. As
cryptocurrencies like bitcoin stormed into Political and regulatory
Unlock the data dividend the public consciousness, blockchain
gained prominence as the enabler of the
landscape
Consider what a ‘new reality’ economy
new gold rush. But as the air seeped out
would look like if everyone in a value
of the cryptocurrency bubble, blockchain’s
chain — or, more accurately, an
reputation fizzled along with it.
economic community — were able
to see real–time, verified ESG data Yet, over the past decade, blockchain
on their suppliers and counterparties. (and other DLT technologies) have
A massive number of new value proven they are not a one–horse show.
propositions and product opportunities The underlying concept — creating an
would be instantly unlocked. immutable, real-time, distributed and
verifiable shared database of tokenized
Banks, for example, could create
assets — remained sound. And, more
products that provide financing to
and more, companies were finding that
asset producers who follow certain
DLT could help them solve some of their
sustainability or environmental
more complex data challenges.
standards. Asset managers could
provide real–time data on the actual

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

It’s already here create economic community DLTs

and blockchain suggests they require
In this respect, financial services firms significant tailoring and strategic
have not been laggards. We are aware
of a number of banks, insurers and asset
managers who already have DLT or
thinking to ensure they fit the use cases
they will enable. We believe the
blockchain solutions embedded into their The approach to building a DLT of ESG next step will Chairman’s message
operating models. However, for the most
part, these investments and deployments
data around, say, rainforests in Borneo
that are being tokenized and traded as see leaders
have been largely internally-focused —
aimed at improving data sharing across
carbon offsets would be entirely different
to one being created around ensuring that
apply these
the enterprises’ more complex business
processes (some, for example, are using
development sites in Mexico are following
environmental regulation, for example.
capabilities Cover story: Goldman
blockchain to speed up inter-branch Some tailoring would also be required to to helping the Sachs: Leading towards
foreign exchanges across global lines of
business).
ensure the solution takes into account
local regulations, language differences business set a sustainable future

Those who tend to stake their reputations

and capabilities.
up, evaluate
on innovation are making even bigger
moves. JP Morgan, for example, has
An emerging field of opportunity and monitor
created a Blockchain Center of Excellence
to explore new use cases and to pilot new
The good news is there are a number
of companies (KPMG member firms
counterparties’ New models for an ESG-
aware financial system
solutions.1 HSBC recently announced that
it was moving more than US$20 billion in
included) working to develop a wide range
of localized use cases that aim to enable
ESG-verifiable
assets onto a blockchain-based custody financial services firms to quickly and data assets.
platform sometime this year.2 easily set up the type of ESG data sharing
platforms they will require to expand into
We believe the next step will see leaders this emerging area.
apply these capabilities to helping the
business set up, evaluate and monitor Given the ongoing disruptions created Measurement and reporting
counterparties’ ESG-verifiable data assets. by the COVID-19 health and economic
situation, KPMG professionals firmly
Putting it to work believe that much more must be done to
explore how DLT and blockchain-enabled
The beauty of using DLT and blockchain platforms might help banks, insurers,
is that it can be combined with a range of asset managers and — critically —
other emerging technologies to enable Political and regulatory
oversight bodies, overcome their current
exactly the type of digitized, verified, ESG data gaps. landscape
tokenized, data-sharing platform that
banks, insurers and asset managers so We hope companies will continue to
desperately need to unlock innovation explore the ‘art of the possible’. But we
around ESG criteria. also encourage international standards
setters and governments to come
Unfortunately, it’s not as easy as going together to see how these technologies
out and buying the latest off-the-shelf can be leveraged to create a level of
blockchain solution (and there are confidence and consistency in the
many). Indeed, our experience working growing ESG market.
with a wide range of companies to

https://www.jpmorgan.com/global/blockchain
1

https://www.reuters.com/article/us-hsbc-hldg-blockchain/hsbc-swaps-paper-records-for-blockchain-to-track-20-
2

billion-worth-of-assets-idUSKBN1Y11X2

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Contributors
5 things to know about using DLT to manage ESG data

Chairman’s message

01
DLT can create trust. Laszlo Peter
It provides the ability for KPMG Australia
E: laszlopeter@kpmg.com.au
everyone in the supply chain Laszlo leads KPMG’s blockchain
to see their counterparties’ services practice for Asia Pacific. His
verified ESG data in real time. mandate is to work with clients to Cover story: Goldman
co-develop distributed ledger solutions Sachs: Leading towards
in Australia and internationally. He has
over 20 years’ experience working with
a sustainable future
large corporates, technology start-ups
and professional services organizations,
Understand incentives.

02
bringing expertise from banking,
The way you build trust will largely securities trading and fintech start-ups.
depend on understanding the
New models for an ESG-
incentive all participants have to
collaborate. aware financial system

James O’Callaghan
KPMG China

03
E: james.ocallaghan@kpmg.com
James is a Partner in KPMG China
Measurement and reporting
Focus on the use cases.
Any solution will first require with a strong focus on the financial
services sector. He specializes
consideration of pain (and trust)
in business transformation, IT
points that technology solutions transformation, business review and
can help solve. process enhancements, governance,
benchmarking and performance
improvement programs across ASPAC Political and regulatory
and Europe.
landscape

04
Be prepared to customize.
Take the time to understand
and embed local nuances (like
languages) and regulatory
requirements.
Tim Denley
KPMG in Japan
E: timothy.denley@jp.kpmg.com
Tim is a Partner with KPMG in Japan
passionate about helping organizations

05
solve complex business problems
Consider value add through innovation and the use of
applications. technology.
Think of DLT as a way to unlock
innovation in ESG product and
service development.

31 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

A new way of looking Chairman’s message

at climate risk for Cover story: Goldman

Sachs: Leading towards
a sustainable future

physical assets
Richard Yee, KPMG Australia
Bartosz Piwcewicz, KPMG Australia
New models for an ESG-
aware financial system

Joseph Hoang-Luu, KPMG Australia

Measurement and reporting

W
ith climate change creating new risks
and societal needs, financial services
organizations must ensure their
services are adapting to the shifting landscape.
Political and regulatory
landscape

32 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

As we go to publication, countries explanation. Average speeds are important from driving in the future — a more
throughout the world are coping with because if travellers suffer slow moving subtle loss of business over time.
the health crisis caused by COVID-19 traffic and congestion, they may seek
There is also the issue of asset
along with its wide-ranging societal and alternative routes or modes of transport
degradation. The effect of prolonged
economic impact. There still are a lot of in the future. Traffic incidents are critical
excessive heat, or more frequent
unknowns, but one thing is clear — the because safety is always key priority.
torrential rain or hail, on assets and Chairman’s message
virus will have profound and lasting
Working with the client in a team with infrastructure could be to shorten their
implications for all of our lives as well as
a wide range of analytical, data and operating lives. But this is difficult to
every business and industry.
catastrophe modeling skills, we have detect and quantify.
In the insurance space, cover is well- been able to assess historical data from
established for damage to physical the client and from other sources such New solutions needed?
assets — but do climate risks mean that as the wider road network and the
Current insurance products are geared
Cover story: Goldman
new hybrid products are needed or that department of meteorology. Linking Sachs: Leading towards
around highly visible effects of one-time
organizations outside of insurance need these data sets together, we then look a sustainable future
events: flooding to a property, lightning
to have deeper understanding of their for evidence of the impact of weather
damage to a roof, a hurricane rolling
exposure to weather events to adapt? events on the client’s key indicators,
through. But how will we deal with the
across its own road assets and the
From work that KPMG Australia have been longer term effects of climate changes?
surrounding network.
conducting for a major Australian toll road Is this simply something that businesses
operator, the answer may very well be ‘yes’. From this, KPMG professionals then must endure — or is there in fact an New models for an ESG-
also modeled the likely impacts opportunity for insurers to create new aware financial system
Admittedly, Australia is an extreme products that meet these needs and so
of climate change under different
example. The news reports that have been create new income streams?
warming scenarios using a collection of
beamed around the world of the bushfires
catastrophe and climate risk models. For
and soaring temperatures sadly testify to After all, there are many different kinds
example, assuming 4°C warming above
that. But even if it is an outlier, the situation of businesses that would welcome
pre-industrial averages by 2100. This 4°C
in the country may show the direction of such cover: power and utility companies
rise, however, is only the average — at
travel that many other parts of the world with highly expensive and complex
its extremes it could be perhaps 10°C — Measurement and reporting
are heading in. generating machinery, manufacturing
meaning temperatures conceivably
sites, infrastructure owners and
It was a growing awareness of climate hitting 60°C in Australia.
operators, supply chain and logistics
shifts that led the client to want to model businesses, property portfolio owners
KPMG Australia specialists are currently
the possible impact of future climate and managers — the list goes on.
compiling our findings and creating
change on its business.
visualizations of the impacts on the client’s
The whole topic of insurability under
KPIs over a geo-spatial map. Political and regulatory
Modeling the business impacts climate change scenarios is an issue
Uncovering gaps in insurance
that needs to be urgently discussed and landscape
What makes this a bit different is that
debated within the industry and with
this client wasn’t only concerned with
Our analysis so far, is revealing that business. In Australia, we are already
the direct costs of weather events to
climate changes are likely to have seeing a number of clients with property
its assets — but wanted to take a wider
impacts on the client’s business that are portfolios finding they either cannot
view and model the potential impacts
not currently insurable. obtain adequate insurance or are being
of climate risks on its broader profit and
asked for prohibitively high premiums.
loss performance. In other words, truly For example, consider an extreme heat
embedding sustainability issues into its event where temperatures reached 60°C. While COVID-19 modeling was excluded
business vision and strategy. Authorities might order schools to close; from the analysis presented in this
companies may tell employees to stay at article the COVID-19 impacts and flow
This involves taking extreme weather
home; sporting and other events may be on to toll road operators is another good
events such as excessive rainfall or
canceled. The result would be a marked example of why planning and modeling
prolonged extreme heat and assessing
reduction in traffic on the operator’s for extreme scenarios should be
what impact they could have on the
roads — and therefore a marked reduction undertaken.
client’s business across four key
in revenues.
indicators: traffic volumes, average No one could ask insurers to make
speeds, traffic incidents/accidents, and The same could apply if there was uneconomic decisions of course. The
toll revenues. torrential rainfall, deterring people from simple fact is that, collectively, viable
traveling. This rainfall could also cause solutions need to be found that work
Traffic volumes and toll revenues are
bottlenecks and slow-moving traffic both for insurers and their clients.
directly linked of course, and their
across the network and deter people
importance to a toll road operator needs no

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Exhibits: The three figures below demonstrate the traditional view of climate risk by geospatial location and how we may
translate this approach to apply to the profit and loss (P&L) over a long-term projection.

Chairman’s message
Figure 1: Natural hazard map
Visualization of a natural hazard output
such as maximum daily temperature
showing colour as the severity of change.
The climate metrics are modeled as Cover story: Goldman
drivers of the performance for assets or Sachs: Leading towards
P&L at a geographical level. Degrees Celcius a sustainable future
3.590–3.690 4.391–4.491
3.690–3.790 4.491–4.591
3.790–3.890 4.591–4.691
3.890–3.990 4.691–4.791
3.990–4.090 4.791–4.891
New models for an ESG-
4.090–4.190 4.891–4.991
4.190–4.290 4.991–5.091 aware financial system
4.290–4.391

Source: KPMG Australia, March 2020

Measurement and reporting

Figure 2: P&L distribution Strategy A versus Strategy B
Graphical depicion of the probabilities
associated with varying P&L impacts of
different strategies such as choosing one
Probability (%)

supplier over another. In this example, the

graph shows that high or low P&L results Political and regulatory
are more likely for one strategy, whereas P&L impact landscape
the other is likely to return a moderate
P&L result.

Source: KPMG Australia, March 2020

Figure 3: Simulated P&L results Distribution of P&L

The range of potential P&L results that Lower than Higher than
the business may experience under
P&L impact versus budget

expected P&L expected P&L

different climate scenarios. The vertical
axis represents the P&L result and the Simulation within
horizontal axis represents the ordered the risk appetite
possibilities of results. This enables
decisions makers to identify their risk
thresholds with respect to climate risk. P&L (ranked by result)
Distribution of P&L
Base
RCP 2.6
RCP 4.5
RCP 8.5
Source: KPMG Australia, March 2020

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Ripples across financial services

As we have seen, the project KPMG Australia is undertaking and the underlying
framework and models have wide-ranging implications for our toll-road operator
client and, by extension, for the insurance industry itself. Contributors Chairman’s message
But, in the same way, climate shifts have implications for the insurance sector,
they also pose significant questions for other parts of the financial services
ecosystem too.
Banks need to analyse their mortgage portfolios and assess which properties they
have lent against may be susceptible to climate impacts. Identifying geographical Cover story: Goldman
locations at risk, do those customers have the insurance needed to rebuild in Richard Yee Sachs: Leading towards
the event of a catastrophic incident? Which customers, from their profiles and KPMG Australia a sustainable future
available data, are more likely to be financially resilient in the event of a disaster — E: richardyee@kpmg.com.au
and which ones may not be able to meet their commitments? Richard is the Partner in Charge for
General Insurance Actuarial Australia.
Then they need to consider: is there anything we can do to help them? What are He has over 30 years of experience
our responsibilities in terms of making customers aware of the risks and helping across all lines of general insurance
them plan for the future? including reinsurance across corporate New models for an ESG-
and consulting roles. He is driving the
This applies equally to commercial lending of course. Not only with lending initiative for actuaries to diversify into aware financial system
against commercial property portfolios, but across all classes. Which business non-traditional fields such as climate risk.
customers could be impacted by climate events, and to what extent? Banks
need to build climate-related metrics into their ratings systems. This is
something that the big ratings agencies themselves are working on, although
this is somewhat in the early stages.
The Bank of England’s publication in December 2019 of a discussion paper on Measurement and reporting
stress testing banks for their resilience to climate risks — potentially starting from
Bartosz Piwcewicz
2021 — only underlines the relevance of this. Banks have to get a firm handle on KPMG Australia
their exposures, quickly. E: bpiwcewicz@kpmg.com.au
These issues are huge for pension funds, asset managers and institutional investors Bartosz is a Director and the Head of
Actuarial Transformation, Systems
too. How exposed are their investments to climate risks, and how could these risks and Data. He has over 15 years of
change if climate change accelerates? Do they need to rebalance their portfolios or commercial experience across all Political and regulatory
exit certain stocks? aspects of actuarial work, gained in
corporate and consulting roles. He
landscape
brings analytical rigor, experience
navigating data that is unstructured
Systemic questions take. This may lead to a rethink of their or limited, and promotes the
approach to how they manage this risk. industrialization of the analytical
There are systemic economic issues framework.
that arise as well. In a country such as For example, it could lead to new
Australia, economic activity and wealth insurance and broader financial products
generation is highly concentrated in a emerging to help corporates transfer
handful of major cities. If these cities some of the risk, in particular, if other
are at high risk of suffering from climate mitigation strategies are not viable.
change effects, what impact could that If they choose to mitigate the risk by
have on the national economy? Could a implementing specific strategies (e.g. Joseph Hoang-Luu
redistribution of some of the economic raising the M2 motorway by 1 meter), KPMG Australia
activity in the country be needed? this could create a need for funding and E: hoangluu@kpmg.com.au
financial advice. Joseph is a manager in the General
In conclusion… Insurance Actuarial team with over
Climate risk is posing new questions to 10 years’ experience across UK and
KPMG member firms’ work is helping all players in the corporate and financial Australian corporate and consulting
corporates and government agencies services ecosystem. It is only by roles. His role in climate risk analysis is
gain better understanding of their managing actuarial resources, designing
undertaking detailed assessments of the
exposure to climate risk at a granular and implementing analytical methods,
data available and modeling the impacts and validating outcomes with other
level and test the impact of different that we will be able to arrive at new experts such as sustainability and
management responses that they could solutions for the future. industry experts.

35 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Driving smart-city Chairman’s message

development
Sustainable funding and
Cover story: Goldman
Sachs: Leading towards
a sustainable future

financing models New models for an ESG-

aware financial system
Stephen C. Beatty, KPMG International

N
ew solutions for creating
bankable smart city Measurement and reporting
developments.

Political and regulatory

landscape

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Infrastructure projects have traditionally But there remains a gap between the
been viewed as stable investments — debt mentality of debt issuers and the
this is now being upended with the equity mentality of the proponents of
inclusion of technology. Innovation is
rapidly picking up pace across all asset
sustainability solutions. We need to
bridge that gap and find ways of fully A new
classes and raises the issue of technical
obsolescence to a new level.
embedding the social or environmental
dividends of an investment into the
generation Chairman’s message

The impact is profound in the

equation. These need to become the
third dimension in financing feasibility
of solutions
development of smart cities. As
municipalities re-imagine their
assessments. are emerging
infrastructure — investors will need to Risks, rewards and repayments that shift
understand different risk profiles and Cover story: Goldman
be comfortable with a new degree Of course, no one could ask a financial infrastructure Sachs: Leading towards
of uncertainty. New solutions will be
needed to match investors’ expectations
institution to make uneconomic
decisions. The numbers have to add up. from a a sustainable future
and liability structures. Getting their capital and interest back is
really where their world begins and ends.
top-down,
A new generation of solutions are
emerging that shift infrastructure from
The social or sustainability benefits of
an investment, however, need to take
centralized
a top-down, centralized approach, to
a user-focused, decentralized model
on the right weighting that reflects their approach, to a New models for an ESG-
aware financial system
with increased agility — and potentially
lower costs. The ‘unpacking’ of large
wider economic potential. After all, if we
can create truly smart and integrated user-focused,
infrastructure projects into a number of
cities, they will generate productivity and
wealth creation possibilities that could
decentralized
smaller, more flexible future-enabled
projects is starting to become a norm.
pay for themselves many times over: a
true social dividend.
model with
Investing in ‘future-enabled’ On the other side of the coin, equity
increased Measurement and reporting
infrastructure investors also need to play their part.
Frequently, there seems to be a focus on
agility — and
The reality is that nobody truly knows
what the future will hold and how cities,
how clever the technology is rather than potentially
users, and governments will respond.
on what it actually does — and how it will
pay its bills. There has to be an economic lower costs. 
Projects will need to anticipate a broad case to persuade the lender, just as the
range of technological developments equity owner has to accept that their Political and regulatory
while allowing for flexibility of application returns will always be subject to greater landscape
to meet the changing demands of users. fluctuations and risk.
New management frameworks are The bottom line is that any borrower has
needed to account for technology risks, to be able to repay their loan — that is
specifically technological evolution. one thing that certainly won’t change.
Cyber risk is also very important.
Smart means useful and data-
The debt and equity equation driven
One key factor for financing and funding
For equity investors or owners, another
is correctly assessing the uncertainty
fundamental point is that what they are
and calibrating upfront investment — and
developing shouldn’t just be smart for
changing the operations and maintenance
smart’s sake. It has to deliver a benefit
costs for smart city projects.
to the citizens of a city. Whether it drives
Financial institutions are beginning better quality of life, economic efficiency,
to include sustainability and social better health outcomes — there has to
considerations in their lending or be a societal benefit. Smart solutions
investment criteria. For example, some are are fantastic if they deliver a positive
moving away from investing in extractive difference. If not, they are irrelevant.
industries; others are pledging specifically
to support clean energy initiatives.

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Of course, smart solutions don’t have The technological risks, security and
to cost vast amounts of money. It’s not privacy risks, the very financing needs
necessarily about creating enormous of tomorrow’s generations — all these
new infrastructure — it can be about factors will change and mean that new
how we interact with the infrastructure approaches are needed.
around us, which includes taking an
We are already seeing new financial Chairman’s message
outcome as opposed to an output
products, oftentimes enabled by
focused mind-set. An illustration of this
technology, designed to support the
is the car navigation system Waze - and
sustainability agenda such as ‘green’ or
other applications like it — that deliver
climate-themed bonds. Although quite
real-time journey and trip-planning
new as an asset class, they are growing
information using sensing technology.
rapidly. However, it remains early days. Cover story: Goldman
As this example underlines, much of what We need to make sure that there is a Contributor Sachs: Leading towards
smart cities will be about revolves around balance between the low cost/low risk of a sustainable future
data. The operators in a smart city will funds and the equity returns.
collect data, curate it and use it for their
decision-making. It will be about data- We can’t just do what we’ve
driven decision-making not ‘rules of thumb’. always done

A transformation of the risk This question of balance remains key. New models for an ESG-
We need to get the lenses through Stephen C. Beatty
landscape KPMG International aware financial system
which risks are viewed right so that the E: sbeatty@kpmg.ca
New and emerging technologies might lowest viable cost of capital is achieved Stephen is the Global Chairman (Non-
help lower the capital needed — and for the borrower and society at large. If Exec), Infrastructure and Head, Global
credit risk involved — but at the same we ask the two sides of the debt and Cities Center of Excellence, KPMG
time other factors could push in the other equity equation to take too much of each International. Having led many major
direction. Climate change has one of the other’s risks, we’ll end up with sub- infrastructure transactions, Stephen
advises both public and private sector
greatest possible consequences, with optimal solutions.
clients extensively in infrastructure
Measurement and reporting
the risk of catastrophic weather events privatization strategy, transportation
In short, if we do things the way we’ve
likely to become an increasingly relevant planning, public-private partnership
always done them, we’ll get the same
factor in pricing. In fact, all of the risk (PPP) policy development and project
answers that we always have.
equations we know today will change. financing.

Political and regulatory

landscape

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Smart solutions don’t have to cost vast amounts of money. It’s

not necessarily about creating enormous new infrastructure — it Chairman’s message
can be about how we interact with the infrastructure around us,
which includes taking an outcome as opposed to an output
focused mindset.
Cover story: Goldman
Sachs: Leading towards
a sustainable future

New models for an ESG-

aware financial system

Measurement and reporting

Political and regulatory

landscape

39 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Promoting Chairman’s message

ESG in Asia Cover story: Goldman

Sachs: Leading towards
a sustainable future

Pacific:
Asset managers lead the way
New models for an ESG-
aware financial system

Cherine Fok, KPMG in Singapore Measurement and reporting

Pat-Nie Woo, KPMG China
Neil Macdonald, KPMG China

A
s environmental, social and governance Political and regulatory
(ESG) thinking gets embedded in landscape
business strategies and cultures, the
asset management industry will undergo
profound changes in how investments are
decided, and how portfolios are managed,
especially in the light of how portfolios have
performed during COVID-19.

40 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

The past few years have seen the global These initiatives are expected to grow
consensus emerge — that not only is in scope in Hong Kong (SAR) China and
climate change the biggest risk mankind the Asia Pacific region more broadly if
has ever faced but also that everyone
has a role to play in solving the problems.
the Chinese government puts a priority
on climate change in its 14th 5-year plan, Some
Climate-change-related environmental
threats comprise the top five long-term
to be announced this year. A signal
that Beijing is putting sustainability at
governments in Chairman’s message
global risks in the World Economic
Forum’s (WEF) 2020 Global Risk Report.1
the forefront of corporate policy could
shift vast sums of capital toward ESG-
the region are
The WEF has called on policy makers managed assets across the globe. taking the lead
and business to work together to develop
sustainable, integrated solutions.
Singapore is also placing its bets on in promoting
sustainability. In August 2019, for Cover story: Goldman
To mitigate climate change within example, the country’s prime minister ESG as part of Sachs: Leading towards
the Asia Pacific region, the United
Nations estimates that US$1.5 trillion2
highlighted ESG’s importance to the
nation’s economic progress in his 2019 their agendas a sustainable future
is needed annually. Governments in
the region cannot afford to make these
Rally Day speech.4 In November 2019,
the Monetary Authority of Singapore
for economic
investments alone. Private capital is
needed to support the financing of
laid out plans to invest US$2 billion
in developing the country as a green
growth, with
lower carbon solutions and underpin finance hub and promote sustainable Hong Kong (SAR) New models for an ESG-
aware financial system
sustainable economic growth. The
asset management industry is key to
financing in the financial sector.5
Like Hong Kong (SAR) China, Singapore’s
China and
promoting this transition.
stock exchange has introduced Singapore chief
And as ESG thinking becomes more
mainstream and the impact on portfolios
sustainability reporting guidelines for
listed companies, and sustainability is a among them. 
of COVID-19 becomes clearer, the asset key pillar supporting Singapore’s 2020
management industry itself will undergo budget initiatives. This budget puts Measurement and reporting
profound changes — from how securities priority on spreading ESG principles and
are selected through, how portfolios practices across all economic sectors.
are managed to how asset allocation It sets broad strategies for transforming
decisions are made. industry, the economy and society, and
lays out ambitious plans for reducing
Asia Pacific governments put harmful emissions, adopting low-carbon
priority on ESG and growth technologies and effective international Political and regulatory
collaboration. landscape
Some governments in the region are
taking the lead in promoting ESG as part Temasek, the Singapore-based global
of their agendas for economic growth, investment company, has explicitly
with Hong Kong (SAR) China, and committed to achieving carbon
Singapore chief among them. neutrality, sending a strong message on
this direction of travel to corporations and
Hong Kong (SAR), China is seeking to
the financial markets. In 2019, Temasek
become a regional hub for sustainable
set up the ABC World Asia Fund to serve
banking and green finance, with 2019
as a private equity fund focused on
seeing the Hong Kong Monetary
investments in the region that generate
Authority (HKMA) introduce several
positive social or environmental impact
measures in these areas. Hong Kong’s
as well as profit.
stock exchange regulator (HKEX)3 has
also contributed to this movement
by introducing ESG-focused listing
requirements, enhancing corporate
governance and transparency, and
updating its reporting guidelines.

1
https://www.weforum.org/press/2020/01/burning-planet-climate-fires-and-political-flame-wars-rage
2
https://www.eria.org/news-and-views/unescap-proposes-up-to-15-trillion-investment-per-year-in-asia-pacific-to-
achieve-sdg-2030/
3
https://www.hkexgroup.com/csr/index.htm
4
https://www.pmo.gov.sg/Newsroom/National-Day-Rally-2019
5
https://www.mas.gov.sg/news/media-releases/2019/new-us$2-billion-investments-programme-to-support-
growth-of-green-finance-in-singapore

41 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Japan’s Government Pension across eight sectors that substantially

Investment Fund (GPIF), the world’s contribute to climate change mitigation.
largest pension fund, has similarly As the Asia Pacific region attracts
put ESG at the heart of its investment
strategy, for example, by investing
investment from most major economies,
such a common language will become As asset
in sustainable indexes, promoting
innovative investment practices and
increasingly important.
managers and Chairman’s message
improving the ESG standards it applies
to its passive portfolios.
Large asset managers operating globally
face additional challenges in developing companies
Other countries and jurisdictions in step
ESG risk monitoring and reporting
frameworks. These frameworks
integrate ESG,
with this trend include Indonesia and
Taiwan, whose governments are also
need to consider risks specific to
each region; this makes it difficult to
there has been Cover story: Goldman
promoting green finance products and identify consistent benchmarks for significant Sachs: Leading towards
practices, and India, which is seeing
more of a push from large corporations,
ESG performance across not only
regions but also sectors and between activity and a sustainable future
for example, to nurture a market for
green bonds.
companies whose operations may cross
sector definitions. As more of this data
debate over
Initiatives like these across the Asia Pacific
becomes digitized and standardized, its
quality and the access asset managers
common
region will channel significant capital flows
toward a lower-carbon economy, and
have to it will vastly improve. One would definitions New models for an ESG-
aware financial system
to those industries and companies that
enable and embrace it.
then hope that investor capital becomes
more accurately deployed to those and metrics
firms whose activities are driving more
sustainable outcomes.
for quantifying
Understanding ESG — toward a
common language From passive ownership to active
ESG costs and
Asset managers and companies are stewardship benefits. Measurement and reporting
now accelerating how they integrate
Asset managers may choose to address
ESG into their everyday activities; with
ESG portfolio risk with simple exclusion
this comes significant activity and debate
policies that avoid entire investments
over common definitions and metrics
in certain activities and assets. Moving
for quantifying ESG costs and benefits.
beyond this somewhat blunt approach,
Different rating agencies use different
and in moving to integrate ESG goals
criteria to score companies’ ESG Political and regulatory
more broadly in their portfolios, many
performance. This can be frustrating
asset managers are investing in their landscape
for companies who find they score well
engagement/stewardship functions.
with one agency but less so with others.
Stewardship-driven, so-called ‘inclusion
The differences are equally confusing
policies’ are fast gaining interest from
for asset managers and other investors
institutional investors; rather than
seeking reliable information on investees
investing elsewhere and leaving firms’
and targets.
ESG shortcomings in place, inclusive
For Asia Pacific countries engaged policies set realistic metrics for activities
in the green finance movement, and processes that aim to achieve
the European Union’s taxonomy for positive ESG change. Asset managers,
sustainable business activities may through their stewardship teams,
provide common, comparable criteria. then work with investee companies
Introduced in 2019, the taxonomy sets to improve their ESG ratings and
detailed screening criteria for activities sustainability outcomes.

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

In fact, some large funds, such as Dutch pension plan Contributors

ABP, actively look for companies that have room to
improve. They then look to generate excess returns by
helping these companies do better on ESG measures.
For managers running mostly index portfolios that
may be used to being somewhat hands-off in terms of
Chairman’s message
their engagement with investee companies, this active
approach to stewardship represents a significant change Cherine Fok
as they acquire and deploy new ESG expertise, skills and KPMG in Singapore
resources for portfolio management. E: cherinefok@kpmg.com.sg
Cherine is a Director, Sustainability Services with KPMG in Singapore
In this current environment, investee companies cannot and has more than 13 years of experience in numerous accounting
approach ESG monitoring and reporting as a box- and advisory projects. She specializes in sustainable development — Cover story: Goldman
ticking exercise. Companies need to deliver detailed in particular, sustainable finance, sustainability and decarbonization Sachs: Leading towards
information about their ESG strategy and performance strategies, implementation, monitoring and reporting of social and
environmental initiatives, sustainability reporting and sustainability
a sustainable future
to financiers, investors and asset managers, and
ensure they can explain the facts underlying their ESG assurance.
performance. Increasingly knowledgeable stakeholders
can already see when a company’s disclosures are only
skin deep, and a lack of credibility on ESG matters will
deter investors, harm corporate reputations and destroy
New models for an ESG-
shareholder value. aware financial system
Leading corporations are centralizing their ESG data Pat-Nie Woo
collection, communication and outreach within a single KPMG China
function. These teams have the knowledge to answer E: pat.woo@kpmg.com
tough new questions about, for example, how they Pat heads up Sustainable Finance in Hong Kong (SAR) China and is
manage risk, whether they are sufficiently diversified, a core member of the KPMG China Steering Committee on Climate
how their supply chains are managed, and how well Change & Sustainability (CC&S). He has been active for over
13 years in the field of sustainable development and now serves on
Measurement and reporting
senior management engages with governments and
the Hong Kong Financial Services Development Council to drive the
industry on policy development. They can also act as an development of green and responsible finance in the region. He is
expert resource to the company’s lines of business. also part of the United Nations Economic and Social Commission
for Asia Pacific (UNESCAP) on their Sustainable Business Network
With an increased focus on sustainable finance, markets Task Force on Banking and Finance.
will reward companies with strong ESG records backed
by high-quality disclosures. Against this backdrop, asset Political and regulatory
managers will be the ones where the board and senior
leadership of the firm lead a cultural shift to embed
landscape
ESG not only in the firm’s core investment process and
across the assets they manage, but also in how they
manage the asset management business as a corporate
Neil Macdonald
enterprise. KPMG China
E: neil.macdonald@kpmg.com
Neil Macdonald leads the Wealth and Asset Management Centre of
Excellence at KPMG China. He was previously a Managing Director
in the UK firm’s asset management practice. Neil has over 15 years
of asset management industry experience working in various senior
front office roles for a number of global investment firms, including
BlackRock and JP Morgan Asset Management. He has also held
senior positions in the banking sector leading change programs
spanning public policy, HR and technology.

43 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

From protection Chairman’s message

to prevention:
Insurers respond to risks
Cover story: Goldman
Sachs: Leading towards
a sustainable future

of natural disasters New models for an ESG-

aware financial system
Edward J. Chanda, KPMG in the US
David Kells, KPMG Australia

G
reater access to real-time Measurement and reporting
environmental data, better
predicting and pricing for
extreme weather risks needs to be
part of the solution.
Political and regulatory
landscape

44 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Currently countries throughout the world once-in-a-lifetime natural disaster, 2018’s hammered in the past 3 years with severe
are coping with the health impacts of Camp Fire, reported to be the most hail storms, floods and cyclones. For the
COVID-19, along with the wide-ranging destructive fire in the state’s history. In fact, insurance industry, the impact of climate
societal and economic impact. November 2018 was the most destructive change with more frequent, intense and
wildfire month in California’s history, with destructive events is upending many of the
However, with the current focus
insurance claims exceeding US$12 billion.4 conventional assumptions about the role
rightfully on addressing COVID-19, it Chairman’s message
of insurance in addressing natural disasters
remains important not to lose sight of the The scale and intensity of the Australia
and causing the industry and governments
long-term challenge of climate change. and California fires were an in-your-face
to rethink the ways that persons and
In recent years we have experienced a demonstration of the impact of climate
property are protected.
marked increase in the frequency and change. Due to climate change, wildfires
severity of natural disasters, including are becoming larger, more intense, The increased damage resulting from
fires, floods, hurricanes and typhoons. and faster moving and more difficult to disasters has enlarged tension in the Cover story: Goldman
These events have become increasingly control. Where the dry season and related system, as insurers work to properly Sachs: Leading towards
damaging, in part due to a greater bushfires have historically lasted a period price risk, while political pressure ramps a sustainable future
concentration of people and property of weeks in Australia, the intense fires of up with allegations of price gouging and
in and near disaster-prone areas. But the past year were unprecedented, lasting demands to reduce premiums.
more critically, climate change is creating months as they spread up and down
In many affected areas, there are
conditions where natural disasters tend Australia’s east coast.
increasing numbers of people who don’t
to be more intense, widespread and
destructive.
Amazingly, as destructive as the bush have insurance or adequate insurance to New models for an ESG-
fires in Australia were to the natural address their loss or damage. Already, aware financial system
The result is that individuals, businesses environment and its wildlife population, there are parts of Australia where the
and governments are faced with the they were actually less damaging in cost of insurance is so high that many
reality that dealing with the effects of terms of insured losses than other people can’t afford it.6 In California, a
climate change can’t wait for some natural disasters. In recent years the moratorium was instituted preventing
time in the future — better solutions for greatest damage has come from hail the canceling of policies in areas in and
coping with the new reality are needed storms, floods and cyclones. In fact, in around the wildfire damage.7
today. Insurance companies in particular terms of cost, the bushfires, with current Measurement and reporting
In Australia, major insurers maintain
are facing pressure to rethink traditional losses at AUD1.65 billion will fall well
a natural hazard allowance to ensure
models that are often not measuring up in short of Australia’s costliest event for
they have the resources to respond
this new environment. the past 20 years.5 The bushfires were
to natural disasters. But even these
strongest in less populated areas, while
No recent natural disaster has captured reserves are being underestimated in
more populated major cities have been
more global attention than the devastating
bushfires in Australia. Dozens of people Political and regulatory
and an estimated one billion animals died
in the horrific fires.1 Australia is no stranger
landscape
to fires in the dry season, but the intensity
and magnitude of the 2019 fires was more Australia´s costliest disasters of past two decades
severe than any experienced before. 2007 $2.19bn QLS, NSW Floods
The scale alone of the fires was 2017 $1.78bn Cyclone Debbie
unprecedented. Beginning off the back 2009 $1.76bn Black Saturday Fires
of severe drought conditions in June of 2010 $1.63bn Melbourne Storm
2019, the fires numbered well over 100 by 2011 $1.53bn Brisbane Flooding
November, burning an area of more than 2014 $1.53bn Brisbane Hailstorm
100,000 square kilometers, the size of 2011 $1.48bn Cyclone Yasi
South Korea.2 Even heavy rains at the start 2018 $1.36bn NSW Hailstorm
of 2020 failed to extinguish all of the blazes, 2010 $1.35bn Perth Storm
and as of February, 50 or more continued
2020 $1bn NSW,VIC,SA,QLD Fires*
to burn in New South Wales.3
$bn 0.5 1 1.5 2 *still active
The Australian fires came a year after
northern California experienced its own Source:Moodys

1
https://www.bbc.com/news/science-environment-51590080
2
Ibid
3
https://www.bbc.com/news/world-australia-51409551
4
http://www.insurance.ca.gov/0400-news/0100-press-releases/2019/release041-19.cfm

45 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

the face of climate change. In 2019, at in flood-prone areas. Extensive flood

least two of Australia’s leading insurers mapping was done to help manage risks,
used up their full-year allowance in just but the historical data used became
6 months. And this isn’t the first time
the natural hazard allowance has been
outdated with increasing development
in areas susceptible to floods and Insurance
underestimated. Over the past 10 years,
it has become an increasingly rare case
hurricanes.9
companies Chairman’s message
where insurers’ predictions of their
natural hazard allowance have proven
Fast forward to today, where mapping
is used to identify particularly fire prone in particular
to be adequate.8 While comprehensive
areas. As with the flood maps, insurance
companies became very disciplined about
are facing
reinsurance arrangements have absorbed
much of those losses, the price and
writing policies in the ‘green’ areas and
not in the ‘red’ areas but as with the flood
pressure Cover story: Goldman
availability of reinsurance coverage will
eventually come under pressure in a world
mapping, fire maps have been made to rethink Sachs: Leading towards
of increased frequency and severity of
natural disasters.
obsolete with the scale and intensity of
fires in the past 2 years. Combinations traditional a sustainable future

It is a strong reflection that the increasing

of historically dry conditions and near-
hurricane force winds, caused intensity,
models that
size and frequency of natural disasters;
from hailstorms, cyclones, flooding, to the
speed and spread of fires beyond the old
predictive models.
are often not
bushfires that we’ve just seen implies that measuring New models for an ESG-
aware financial system
the models for predicting these events
are obsolete or at a minimum in need of a
What more can be done?
The insurance industry and policy makers
up in this new
major recalibration.
are increasingly recognizing that while environment. 
historically the insurance model has been
What does this mean for insurers
built around protecting policy holders from
and their policy holders? loss, going forward the new business
Greater access to real-time environmental model will have to rely much more on Measurement and reporting
data, better predicting and pricing preventing the loss in the first place.
for extreme weather risks is part of
As the California fires spread, insurance
the solution. There is also a greater
companies reacted quickly to help
burden on individuals and businesses
policy holders, even working to help
who want to locate in areas more
prevent further spread of the fires. They
exposed to climate-based events, and
sent teams to join in local efforts to cut
the municipalities who encourage the Political and regulatory
forestation back. They sprayed flame
development. Insurers would argue
retardant foam around policyholder landscape
that for those who choose to live in a
homes.10 And as losses occurred, they
place that is prone to natural disasters,
took aerial photos of damaged property
an appropriate rate has to be charged to
so that they could more quickly pay out a
provide the protection that is needed.
portion of insurance proceeds to people
In the US, insurers learned lessons about who needed them.
the unpredictability of damage from
The question is, could more be done
natural disasters going back to the early
to better prepare in advance? Better
20th century. Damage from flooding
monitoring using drones and advanced
along the Mississippi River in the 1920’s
sensors are already playing a role.
overwhelmed private flood insurance
Advanced technologies like artificial
and caused the collapse of a number of
intelligence will undoubtedly be used to
insurers. Many insurers stopped writing
better predict where and when events
flood policies as a result, leading to a
could occur. There are also more practical
range of government efforts to mitigate
steps that can be taken, from helping
flooding with dams and levies and
ensure policyholders have the right
establishment of programs such as the
roof shingle and building design for the
National Flood Insurance Program (NFIP)
exposure that they have, to making sure
to help protect homes and businesses
brush is cut back from structures.

5
https://www.insurancebusinessmag.com/au/news/breaking-news/can-the-insurance-industry-sustain-bushfire-losses-211716.aspx
6
https://www.news.com.au/finance/money/costs/experts-warn-of-red-zone-insurance-risk-as-severe-weather-spreads/news-story/7c53467ad08a523806b84208a1b664ef
7
https://www.nytimes.com/2019/12/05/climate/california-fire-insurance-climate.html
8
https://www.afr.com/companies/financial-services/iag-slashes-guidance-on-exceptionally-harsh-weather-20200212-p53zyi
9
https://www.pewtrusts.org/en/research-and-analysis/articles/2016/06/07/how-20th-century-events-shaped-the-national-flood-insurance-program
10
https://www.insurancejournal.com/news/west/2018/11/13/507288.htm

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
New models for an ESG-aware financial system

Extreme weather: Prevention and protection Contributors

Modeling Chairman’s message

Analysis Satellites
Edward J. Chanda
KPMG in the US
E: echanda@kpmg.com
IoT Forecasting
Ed is a Partner in KPMG’s Insurance
Practice. He serves as the National
Sector Leader for Insurance, leading Cover story: Goldman
Fire Earthquake
the firm’s efforts regarding client Sachs: Leading towards
experience and resources for the
Hurricane Tornado
insurance practice. He has 30 years
a sustainable future
of experience serving the insurance
Alerts Process
industry, both property casualty and life,
and has been a partner since 2001.

Planes Drones
New models for an ESG-
aware financial system
Monitoring

David Kells
Source: KPMG International, 2019. KPMG Australia
E: dkells@kpmg.com.au
As Insurance Sector Leader, David
is passionate about working with
Measurement and reporting
There is also a massive public policy piece that needs to be addressed to get his clients and understanding their
alignment on preventative measures. Building codes and environmental matters needs. David has more than 28 years’
are two significant areas that require attention. There needs to be the right balance experience in financial services,
between environmental regulation to preserve trees and green space but also delivering a range of audit and advisory
services focused in the insurance and
allow for a certain amount of hazard reduction to manage the risk of wild fires. A
wealth management sectors. This has
coordinated, targeted approach to forest management is essential to help manage included external and internal audit
and reduce fire risks. Building codes also need to be reviewed. More stringent building Political and regulatory
and advising clients on regulatory
codes unquestionably bolster resistance to natural hazards. They also increase the change, risk management, finance landscape
replacement cost for homes and businesses, so an appropriate policy response transformation, corporate governance
from government and industry is needed to support this transition while maintaining and accounting.
affordable insurance coverage.
For insurers it is a challenging dynamic — adapting to a more uncertain and rapidly
changing environment, pricing products properly, while avoiding losses and
remaining capitally sound. It will require shifting the traditional focus on protection
more to prevention. This means the insurance sector working closely together with
government, communities and policyholders to better prevent, as well as protect
against, damage from natural disasters.

47 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Measurement and reporting

Towards Chairman’s message

consistent Cover story: Goldman

Sachs: Leading towards
a sustainable future

and New models for an ESG-

aware financial system

comparable Measurement and reporting

ESG reporting
Tom Brown, KPMG in the UK
Adrian King, KPMG Australia
Political and regulatory
landscape

Jiska Klein, KPMG in the Netherlands

F
or financial institutions, it is important to take
account of environment, social and governance
(ESG) factors when assessing credit and market
risk. But this multiplicity means that it can be challenging
to take an objective view because the different
frameworks are often not directly comparable.

48 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Measurement and reporting

Prior to the global spread of COVID-19, Not ‘reinventing the wheel’

sustainability, climate change and
responsibility were at the top of the Another critically important feature
about these proposals is that they are
agenda for executives around the world,
as evidenced by this year’s annual absolutely not about ripping out what
already exists and starting again. On
A significant
meeting of the World Economic Forum
in Davos, Switzerland (January 2020). the contrary, their aim is to build on the number of Chairman’s message
During the week-long event these
themes dominated much of the agenda
good work already in place and bring it
all together. As the WEF put it in their frameworks
and sparked wide-ranging debate. announcement during Davos: and voluntary
And it was not just all theory. There was
a powerful consensus that the time
“The metrics are drawn, wherever
possible, from existing standards and standards Cover story: Goldman
has come for concerted action. One disclosures such as Global Reporting
Initiative (GRI), Sustainability Accounting
already exist for Sachs: Leading towards
manifestation of this was the publication
of a new set of proposals from the Standards Board (SASB), Taskforce on
Climate-related Disclosures (TCFD),
ESG reporting, a sustainable future
WEF’s International Business Council
(IBC) for common metrics and reporting Climate Disclosure Standards Board even running into
disclosures around ESG factors.1 (CDSB) and others. Instead of reinventing
the wheel by creating a new standard, the hundreds.
A significant number of frameworks
and voluntary standards already exist
they aim to amplify and elevate the
rigorous work that has already been done
But in fact, this New models for an ESG-
aware financial system
for ESG reporting, even running into
the hundreds. But in fact, this is part of
by these initiatives, bringing their most
material aspects into mainstream reports
is part of the
the problem. There are so many that for on a consistent basis.” problem. 
some preparers it can be hard to know
which one to follow. 4 pillars, 22 metrics
For financial institutions, meanwhile, So what is actually in the proposals? There
it is becoming increasingly important are 22 core metrics that are spread across Measurement and reporting
to take account of ESG factors when four pillars — Principles of Governance,
assessing credit and market risk. But Planet, People and Prosperity. These are
this multiplicity means that it can be aligned with the United Nations Strategic
challenging to take an objective view Development Goals (SDGs) and with the
because the different frameworks are principal ESG domains.
often not directly comparable. Political and regulatory
Principles of Governance is the ‘G’ of
A common standard ESG, covering a company’s commitment landscape
to ethics and societal benefit; Planet
This is why the proposals put forward is the ‘E’, looking at themes of climate
by the IBC are potentially so significant. sustainability and environmental
Developed in conjunction with the Big responsibility; People is the ‘S’, focusing
Four accounting firms, the proposals on the roles human and social capital play
aim to create a core set of commonly in business; Prosperity meanwhile brings
adopted metrics that will bring consistency, a financial lens, but one that is concerned
comparability and transparency to reporting with business contributions to equitable,
of non-financial risks and ESG factors. innovative growth — economic
prosperity on a wider basis than simply
The IBC consists of around 120 members,
a company’s own profit generation,
including many of the world’s largest
including community investment and tax.
businesses (and a plethora of major
financial services organizations). So these It goes without saying that, in the
are proposals developed by business, for wake of COVID-19, these attributes
business. of social responsibility, commitment
to communities, and contributions
They are also significant because one
to economic growth, will become
of their core aims is to bring about the
more important than ever before.
‘mainstreaming’ of ESG reporting —
Consequently, consistent and
by bringing key ESG disclosures into
transparent reporting around them will
annual reports themselves, rather than
become even more crucial too.
being confined to separate, standalone
reporting documents.

Toward Common Metrics and Consistent Reporting of Sustainable Value Creation, World Economic Forum, January 2020
1

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Measurement and reporting

Different degrees of challenge and precision of reporting on the factors

influencing long-term value”. They provide
To report against the core metrics should a “pathway for continuous improvement”
not, in fact, be a challenge for ‘mature’
businesses who have an established
ESG reporting program. For example,
that companies can aspire towards.
To take one example that illustrates
There could be a
we ran an analysis for one client of this, in the People pillar there is a core real investability Chairman’s message
KPMG and found that they already report
against 21 of the 22 core metrics.
metric of ‘skills for the future’ in which
companies are asked to quantify the dividend for
However, for those businesses that do
average hours of training per person
that the organization’s employees have
companies in
not report on ESG factors, the nature of
the task will be quite different: significant
undertaken, together with the average
training and development expenditure
less developed Cover story: Goldman
work will be required to gather the
necessary information. The proposals
per employee. markets Sachs: Leading towards
are voluntary so no business will be
compelled (at this stage at least) to report
The expanded metric against this asks
for information that is much harder to
that adopt a sustainable future

against them — but if, as expected, calculate: the monetized impacts of the metrics,
they gain traction among investors and
stakeholders, then pressure will inevitably
training. That is to say, the estimated
future uplift in lifetime earnings as a increasing their
grow for organizations to adopt them. result of training intervention. This should
be calculated using the income-based
attractiveness to New models for an ESG-
aware financial system
The main focus of this pressure will of
course be on publicly-listed companies,
approach to human capital valuation.
Clearly, this is of a different order of
financers.
but at the same time could spread into difficulty than quantifying how much
the private arena. Private businesses training has been delivered and how
need financing and equity as much much it cost.
as public entities — and if financial
institutions continue the trend of Fast track to implementation
factoring ESG issues into their lending Measurement and reporting
and investment decisions, then In keeping with the general recognition
increasing numbers of private companies that the world needs to act fast on
may adopt the reporting metrics too. climate and other issues, the proposals
are set to be introduced on an
It is also to be hoped that the reporting accelerated timeline — the expectation
framework will be adopted not only by is that many companies will incorporate
businesses (and promoted by regulators) Political and regulatory
reporting against the metrics in their
in mature markets in the Americas, annual reports for financial years ending landscape
Europe and ASPAC but in many other 31 December 2020 and others will
countries too. There could be a real follow. In other words, we should see
investability dividend for companies in the first reporting in annual reports early
less developed markets that adopt the next year.
metrics, increasing their attractiveness
to financers. By taking the lead locally, To achieve this, there will be a
they could also encourage others to consultation period in the next months.
follow suit. Embracing the framework is The consultation period on the proposals
an opportunity for business communities closes at the end of May, and any
in less developed jurisdictions to send necessary revisions or updates will then
out a strong message to stakeholders be made to the metrics, before they
and investors internationally about their are ‘stress‑tested’ with a selection of
commitment to the ESG agenda. issuers and investors over the summer
period. A key consideration, of course, is
Expanded metrics to aim for that investors should find the reporting
valuable and informative — so their
The core metrics are very much feedback will be critically important.
positioned as the minimum requirements. The hope is to find a format similar to
In addition, there are a further 30 TCFD reporting where key summary
expanded metrics and disclosures that information can be presented in one
are more challenging to report against. table — easy to digest and examine, with
These, the IBC says, can help companies more detailed reporting sitting behind it.
“progress towards greater depth, breadth

50 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Measurement and reporting

Financial services leading by At the same time, it will be important Contributors

example? that the financial sector leads the way
in adoption of the metrics in its own
For financial services businesses, reporting. If financial institutions are
we hope the proposals will be truly to expect clients to report against
welcome. The new metrics will fill the them, they will need to have their own
information gaps that sometimes exist Chairman’s message
houses in order too.
in ESG reporting and provide direct
comparability between businesses. At KPMG, we are proud to be involved Tom Brown
in the development of this new KPMG in the UK
This will enable financial organizations E: tom.brown@kpmg.co.uk
to make better-informed lending, ‘common language’ for ESG reporting
Tom is a Chartered Accountant and
investing and underwriting decisions. and look forward to advising clients on has been a Partner in KPMG’s financial
meeting the requirements. services practice in London since 1999, Cover story: Goldman
having joined the firm in 1987. He Sachs: Leading towards
was the KPMG Global and UK Head
of Asset Management for 10 years
a sustainable future
until 2019. He has been the client lead
partner for a number of significant
investment managers, hedge funds and
pension funds. Tom has led advisory
assignments including operational and New models for an ESG-
process reviews as well as internal
audits, transactions and listings. aware financial system

Adrian King
Measurement and reporting
KPMG Australia
E: avking@kpmg.com.au
Adrian is committed to helping
businesses improve their social and
environmental performance. He believes
this is key to building a more resilient
global economy. As well as leading Political and regulatory
KPMG’s global Sustainability Reporting
and Assurance Services, Adrian is also landscape
the Partner in Charge of the Sustainability
Services practice at KPMG Australia. He
has more than 25 years’ experience of
working with global public and private
companies to provide financial and
non-financial advisory, reporting and
assurance services.

Jiska Klein
KPMG in the Netherlands
E: klein.jiska@kpmg.nl
Jiska has specialized in ESG strategy
development, reporting and impact
measurement to support companies
in prioritizing long-term value creation
in their strategy and decision-making
processes. Jiska is a member of the
Global Sustainability Services practice
specializing in TCFD, True Value and
Assurance. She has an academic
background in international and
development economics in combination
with extracurricular courses on
environmental and energy sciences.
51 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Measurement and reporting

Creating an Chairman’s message

impact Cover story: Goldman

Sachs: Leading towards
a sustainable future

management New models for an ESG-

aware financial system

framework
Leonie Jesse, KPMG in the Netherlands
John Cho, KPMG in Canada
Measurement and reporting

Political and regulatory

landscape

A
s the importance of societal and
environmental factors continues to
grow, asset managers need to find
ways to measure and report on the impact
of their investment portfolios to their
clients and wider stakeholders.

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Measurement and reporting

Measuring the societal impacts of But it is not only about climate — other
investment funds megatrends are vitally important too and
influence decision making within the
As the importance of social and
environmental factors in investment
financial sector. Issues such as human
rights, biodiversity loss and plastic There has been
grows, asset managers are looking for
new ways to measure and report on the
waste — all of these translate into both
challenges and opportunities for investors
a dramatic Chairman’s message
impact of their investment funds to their
clients and wider stakeholders.
to evaluate. galvanization
Asset managers handle billions of dollars The challenge for asset managers among
in investments on behalf of institutional
investors, pension funds and individual
Due to COVID-19, we have quickly been
confronted worldwide with our own
the global Cover story: Goldman
savers. The financial performance of
these investments is, and always will be,
vulnerability. Furthermore we must realize community Sachs: Leading towards
critically important — but at the same
more than ever that we have greatly
exceeded the earth’s carrying capacity to take more a sustainable future
time, a growing consciousness of social
and environmental factors is shifting the
on a global scale. This emphasizes the
importance to promote sustainability and
action, faster,
game. Institutional investors need insight
into the ‘non-financial’ impacts of their
to ensure that people, the environment
and the economy are rebalanced in a
to mitigate
investments for two main reasons: they
need to be able to assess the robustness
sustainable world. The financial sector against a potential New models for an ESG-
aware financial system
of their funds to a world experiencing
plays a key role in this. Measuring the
impact of investment decisions is essential worsening of
such things as climate change,
degradation of nature and material
in order to properly interpret the role of
the sector in the transition to a sustainable climate change. 
resource scarcity; and they increasingly economy.
need to respond to questions about the
real-world impact of their investments In response, the financial sector is
from stakeholders. stepping out of its historically passive Measurement and reporting
role and embracing the concepts of
Amid growing public interest, the sustainable finance in a more active and
emergence of social and environmental comprehensive way. ESG policies and
investment risks has not gone unnoticed commitments are becoming increasingly
by regulators. Asset managers and embedded into investment approaches
financial services businesses across and decision making, along with improved
the spectrum have to take account sustainable investment reporting. Political and regulatory
of a growing body of ESG integration landscape
and reporting requirements through For asset managers, it is a real challenge to
measures such as the Taskforce on measure and quantify the environmental
Climate-related Disclosures (TCFD), IORP and social impacts of their investments
II (pension regulation), the EU taxonomy at a fund level. It is one thing to assess
of sustainable economic activities, and the the impact of a specific stock, but when
Network for Greening the Financial System there are perhaps 200 stocks comprising
led by central banks and supervisors. a fund, creating an accurate picture is
complex. Across many criteria there
A growing set of risks is a lack of relevant data and it remains
extremely difficult to make judgements
Although minds are rightly concentrating on a comparable basis between different
on controlling COVID-19 at present, investments.
climate change and climate-related risks
will become top of mind again when The CISL solution
the outbreak is over — the growing
prevalence of extreme weather events Fortunately a solution is at hand. The
around the world make the issue University of Cambridge Institute
visible and real for many people, and for Sustainability Leadership (CISL),
this will continue. There has been a in conjunction with its Investment
dramatic galvanisation among the global Leaders Group (ILG), has developed a
community to take more action, faster, to framework — the Investment Impact
mitigate against a potential worsening of Framework — for assessing portfolios of
climate change. listed equities or corporate bonds.

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Measurement and reporting

The framework is based on the United Figure 1 shows an example of a report for a portfolio.
Nations 17 Sustainable Development
Goals (SDGs), grouping them into six
Combining information on the six impact themes
themes, three environmental (climate
stability, healthy ecosystems, resource
security) and three social (basic needs,
lthy ecosystems Chairman’s message
wellbeing, and decent work). Hea
Assessing relative fund ty
527 C
performance cubic metres

lim
ur
ec
water

ate
es
Based on data that are widely available
4.6 39

sta
urc
from recognized data providers, the Cover story: Goldman

bility
Reso
framework assesses the absolute tonnes tonnes Sachs: Leading towards
performance of a fund as well as its waste CO2e
a sustainable future

relative performance in comparison to
a benchmark. It does this across all six
themes and provides a color-coded score
for each one, enabling the asset manager
or owner to understand and assess the
2.4 1.9 New models for an ESG-

rk
US$
Bas

performance of a fund and compare it to jobs

wo
revenue
others. It is suitable for any fund, not just aware financial system
ic n

nt
those claiming to be ‘ESG’ or green.
0.1m

ce
ee

De

ds

To briefly summarize the six key themes US$ tax

in the CISL framework, they look at the
following criteria:
Wellbeing
1. Climate stability: the global effort to Measurement and reporting
curb the earth’s temperature rise, and   Very positive   Positive   Neutral   Negative   Very Negative
an asset’s alignment with the Paris
consensus to hold temperature rises Source: In search of impact per US$1m invested, The Cambridge Impact Framework, University of
‘well below’ 2°C. Cambridge Institute for Sustainable Leadership. http://www.cisl.cam.ac.uk/climatewise

2. Healthy ecosystems: the

maintenance of ecologically sound Political and regulatory
landscapes and seas for people and A significant step — with more to do exists today at scale is number of full
landscape
nature. time equivalent (FTE) workers.
The framework recognizes that this is
only the beginning. There is a gap today That said the framework is a significant
3. Resource security: the preservation between what can be measured and step in the right direction — an early
of natural resources through efficient what we would ideally like to measure opportunity to get started with
and circular use. if improved data were available. For impact measurement on what will be
example, the ideal measure of climate a continuing journey to develop the
4. Basic needs: the provision of critical stability might be the alignment of an framework as more granular and robust
services to all in society, including asset to future warming scenarios data becomes available.
low-income people to help them based on consumption of ‘global
escape poverty. The framework has been well received
carbon budget’. But at present, the
by many significant fund managers,
measurement is made based simply on
5. Wellbeing: enhanced health, including the organizations making up
total greenhouse gas (GHG) emissions.
education, justice, and equality of the Investment Leaders Group, the
An ideal measure of decent work
opportunity for all. a global network of pension funds,
would take into account numbers of
insurers and asset managers committed
employees, working conditions, pay and
6. Decent work: the creation of secure, to advancing the practice of responsible
contract types across the whole value
socially-inclusive jobs and working investment in collaboration with CISL.
chain, but in reality the only data that
conditions for all.

https://www.cisl.cam.ac.uk/business-action/sustainable-finance/investment-leaders-group
1

54 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Measurement and reporting

Moving the framework online investment fund code, and then pull off an Contributors
instant report showing them the status of
At present the framework in its current their investments. It will be available for fund
form requires a fairly significant managers globally to access.
investment of time and effort by
asset managers to generate results as it The ultimate goal for the online tool is to
requires entering portfolio information into make it much easier and quicker for asset Chairman’s message
spreadsheets. managers to use the CISL framework,
which should help increase the number Leonie Jesse
At KPMG, we quickly saw the high value of institutions adopting it. That way, the KPMG in the Netherlands
and potential of the framework and reached framework could become an important E: jesse.leonie@kpmg.nl
out to CISL with an offer to help move the Leonie is an Associate Director in
milestone towards a common standard the sustainable finance practice. She
framework online. Based on our extensive across the industry. has a background in banking, asset Cover story: Goldman
benchmarking research, we believe it to be
highly suitable for assessing investments at With so much resting on asset managers management and sustainability and Sachs: Leading towards
experience as a director/manager, a sustainable future
a fund level. being able to report on ESG performance, board member and entrepreneur.
our hope is that the CISL framework, Within the sustainability practice
Given this, we are delighted to have powered by the online tool we are she focuses on the financial sector.
begun working with CISL to help developing, will empower stakeholders Her areas of experience range from
develop an online tool through which through the investment value chain to responsible investment, sustainable
the framework can be applied. Our finance and impact investing, to
channel capital into more sustainable New models for an ESG-
collaboration with CISL is being led by funds. impact measurement, True Value and
Dutch sustainable finance professionals education. aware financial system
from the KPMG Climate Change and In light of the COVID-19 outbreak,
Sustainability services network, with measuring the impact of investment
input from KPMG colleagues globally. decisions has become even more
essential in order to properly interpret
The initiative will mean that, in the near the role of the sector in the transition to a
future, asset managers will be able sustainable economy.
to access an online portal, enter their Measurement and reporting
John Cho
KPMG in Canada
E: johncho@kpmg.ca
John is the Global Institutional
Investors Group Lead and the Head
Investment Leaders Group of Deal Advisory for Canada. He
The Investment Leaders Group (ILG) is a global network of pension funds, advises the pension plan and private
insurers and asset managers committed to advancing the practice of responsible equity community on domestic and Political and regulatory
cross-border transactions. John’s
investment. It is a voluntary initiative, driven by its members, facilitated by the focus industries also include retail,
landscape
Cambridge Institute for Sustainability Leadership (CISL), and supported by software, media, manufacturing,
academics from the University of Cambridge. gaming, healthcare and seniors’
housing. His experience also includes
The ILG´s vision is an investment chain in which economic, social and the mergers and acquisitions group of
environmental sustainability are delivered as an outcome of the investment a corporate finance dealer, where he
process as investors go about generating robust, long-term returns. advised companies on acquisition and
divestiture mandates.

55 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Political and regulatory landscape

Overseeing Chairman’s message

the transition: Cover story: Goldman

Sachs: Leading towards
a sustainable future
Central banks move on climate change

Wim Bartels, KPMG in the Netherlands

Maureen Finglass, KPMG in Germany New models for an ESG-
Francisco Uria Fernández, KPMG in Spain aware financial system

C
entral banks understand the systemic
risk climate change represents, and they
are starting to take action. Here’s what Measurement and reporting
bank executives should know.

Political and regulatory

landscape

56 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Political and regulatory landscape

Now, more than ever, central banks more about ESG and climate change
are focused on risk. And, as COVID-19 than ever before. The reputational risks of
evolves, they are increasingly recognizing inaction are growing.
that the rebuilding phase offers a unique
opportunity to encourage action on the
Not surprisingly, central banks now The pressure
recognize that the markets are evolving
climate change agenda. Here’s what bank
executives should know.
quickly. And they know they need to catch is rising Chairman’s message

While the acute phase of COVID-19

up if they want to ensure they are able to
shape the systemic risk of a climate crisis3. as more
may have drawn central banks’ attention
away from the environmental, social and Taking action
investment
governance (ESG) agenda as they dealt
So what are the central banks and capital starts
with the immediate economic challenges Cover story: Goldman
(see page 60), all signs suggest that
banking supervisors doing to help
transition the industry towards a greener
to flow Sachs: Leading towards
focus is quickly returning.
future? Prior to COVID-19, some central
banks had been surprisingly active.
towards a sustainable future
What the central banks are starting to
recognize is that the COVID-19 health and The EU is, perhaps at the forefront. On ESG-linked
economic situation has created a unique
opportunity to deal with a different, much
23 April (in the midst of the COVID-19
situation) the european supervisory and impact
slower-moving, yet equally disruptive
systemic financial risk caused by climate
authorities published their draft
regulatory technical standards related to
investment New models for an ESG-
aware financial system
change. Central bank leaders have been
raising the alarm for years.
ESG disclosures4. vehicles. 
The European Central Bank (ECB) has
“As financial policymakers and prudential also been moving on a number of fronts.
supervisors we cannot ignore the Before COVID-19, they had been hard at
obvious physical risks before our eyes”, work helping the EU Commission develop
warned Mark Carney, former Governor of a European-wide taxonomy to be used in
the Bank of England and François Villeroy climate-related information disclosures. Measurement and reporting
de Galhau, Governor of the Banque de A taxonomy should help bring a level of
France, last year. “Climate change is a consistency and awareness to the industry
global problem, which requires global (in Europe, at least) while clarifying which
solutions, in which the whole financial economic activity can be viewed as being
sector has a central role to play1.” environmentally sustainable.
Those familiar with Mr. Carney would They had also been working closely with Political and regulatory
not have been surprised. As the head technical expert groups on sustainable landscape
of the Bank of England, he had been finance, green bonds and other emerging
sounding warnings about the systemic areas related to the climate change agenda.
risks of climate change for years. The stark And they had started talking to their
message to the financial sector came banks about their level of preparedness
as part of a report from the Network for for dealing with the risks associated with
Greening the Financial System (NGFS) climate change.
outlining steps that central banks should
At the national level, central banks were
be taking to help combat climate change2.
also making strong intonations about their
Now, as public and private funds start expectations for their respective banking
to flow towards rebuilding the economy industries when it comes to managing
and restarting industries, the pressure climate-related risks. Last year, for
is rising. Investment capital is rapidly example, the Bank of Spain held a number
moving towards ESG-linked and impact of meetings with industry in which they
investment vehicles. And, at the same clearly communicated they will be taking a
time, society’s expectations and close look at their banks’ risk functions to
common values are shifting; in the wake assess their ability to understand, mitigate
of the COVID-19 situation, people care and measure these new risks.

1
https://www.theguardian.com/commentisfree/2019/apr/17/the-financial-sector-must-be-at-the-heart-of-tackling-
climate-change
2
https://www.ngfs.net/sites/default/files/medias/documents/ngfs_first_comprehensive_report_-_17042019_0.pdf
3
https://www.esma.europa.eu/sites/default/files/jc_2020_16_-_joint_consultation_paper_on_esg_disclosures.pdf
4
https://www.bis.org/publ/othp31.pdf

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Political and regulatory landscape

A coordinated effort
A growing number of central banks and
banking supervisors are starting to work
together to progress a global approach
and agenda. The Network for Greening the
Financial System (the group that issued Chairman’s message
the report forwarded by Mr. Carney and
Mr. Villeroy de Galhau) is, itself, a global
network of central banks and banking
supervisors. In the 2 years since its
founding, it has already grown to include 55
central bank members and 12 observers. Cover story: Goldman
Sachs: Leading towards
The Bank for International Settlements
(BIS) — an institution owned by the central a sustainable future
banks — also plays a global financial
regulatory role and has weighed in with
a recent report that looks at the systemic
financial risk posed by climate change.
Their report offers some potential policy New models for an ESG-
responses that could be brought to bear by aware financial system
central banks5.
Other initiatives have also helped
influence the agenda for central banks
and their industry constituents. The
Task Force on Climate-Related Financial
Disclosures (TCFD), for example, Measurement and reporting
was created by the Financial Stability
Board (FSB) and included leading
industry executives, thought leaders,
global accounting networks including
KPMG and academics from around
the world. That group created a set of
recommendations aimed at developing Political and regulatory
a structure for disclosing information on landscape
climate-related risks and opportunities6.

More regulation, please!

Clearly, the ongoing COVID-19 situation
will slow government action in translating
this thought leadership and activity
into actual regulations, supervisory
expectations and guidance that banks
can apply to their current risk and control
frameworks. For once, banks seem to be
asking their supervisors for more rigor
and regulation.
That won’t likely come any time soon.
Notwithstanding their work on taxonomy,
disclosures and the green bond market, the
EU is still some way off from promulgating

5
https://www.bis.org/publ/othp31.pdf
6
https://www.fsb-tcfd.org/

58 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
 Political and regulatory landscape

formal regulation on the topic. That being assess their preparedness for some Contributors
said, the ECB is starting to include climate of the risks outlined by the BIS and the
considerations in their current monetary NGFS in their recent reports. There are
policy review (“We are not sitting on a number of organizations working to
our bottoms doing nothing,” noted ECB develop scenario analysis guidance (the
head Christine Lagarde at a recent news NGFS is one group spearheading that
Chairman’s message
conference).7 Other major markets seem workstream) that should help banks
to be stopping short of translating their start to think through all of the various Wim Bartels
‘expectations’ into actual guidance. potential outcomes and impacts. KPMG in the Netherlands
E: bartels.wim@kpmg.nl
Instead, the central banks and banking At the same time, banks should also be
Wim is a member of the Task Force on
supervisors seem to be focused on examining their data, their risk processes Climate-related Financial Disclosures
encouraging the banks to have the and their capital allocations — post and a partner with KPMG in the Cover story: Goldman
right data, the right risk management COIVD-19 — to understand exactly Netherlands. He leads Climate Risk Sachs: Leading towards
approach and the right transition planning how they are currently managing these Services globally.
a sustainable future
capabilities to ensure resilience in the risks. And, looking forward, they should
face of various climate risk scenarios. be considering how to include climate
They are helping banks understand what considerations into their strategies and
the leading organizations are doing. And new operating models as they rebuild
they are offering tools and structures their books of business.
to help banks improve their ability to
New models for an ESG-
Banks could also be working closely with aware financial system
measure, manage and mitigate the Maureen Finglass
their central banks and supervisors to
associated risks. KPMG in Germany
help shape the agenda and drive positive E: maureenjuliafinglass@kpmg.com
What does this mean for banks? action. Whether through participation in Maureen is a Senior Manager in the
regulatory task forces or simply through KPMG ECB Office working with
Perhaps the biggest takeaway for banks industry association activity, banks deal advisory topics in the European
should be that the financial system should be working with the regulators banking sector. Prior to joining the
regulators and authorities are all moving and supervisors to drive towards a ECB Office, Maureen worked on a
major G-SIB audit in Germany on the
Measurement and reporting
in one direction on the ESG agenda. And, comprehensive solution.
valuation of financial and non-financial
rather than dampen focus on the long- instruments, as well as regulatory
term climate change risk COVID-19 has Central banks and banking supervisors
understand that COVID-19 is going to enforcement litigation topics.
sharpened it. Banks will want to achieve
a clear understanding of how their cause deep economic challenges. And
particular regulators and authorities plan their priority today is (rightly) to manage
to achieve their agenda over the medium- those risks. Political and regulatory
to-long term. Yet disruption always brings opportunity. landscape
It’s not just the financial system This crisis will be no different. At the
regulators and authorities that banks very least, the COVID-19 experience Francisco (Paco) Uria Fernández
will need to monitor and understand. will change the way communities view KPMG in Spain
Many banking customers — not only sustainability. And that, in turn, will create E: furia@kpmg.es
unique opportunities to mitigate the Paco is a Senior Partner with KPMG
in the extractive industries — will soon in Spain and the EMA region Head of
need to comply with more stringent longer-term systemic risks created by
climate change. Financial Services, Banking and Capital
ESG requirements, too. And that could Markets. A qualified lawyer, he holds a
add significant risk to a bank’s portfolio. While progress may have been slowed in Doctorate of Law (Banking Regulation)
Understanding the ‘downstream’ the short-term, there is every indication from the Complutense University
impacts will be a significant and of Madrid. Paco has also authored a
that the central banks now have every
important undertaking. number of publications mainly related to
intention of getting ahead of the curve. financial regulation.
If they haven’t already done so, banks Banks had better get ready.
should also be taking the time to

7
https://www.nytimes.com/2020/01/23/business/climate-change-central-banks.html

59 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Spotlight on COVID-19

Central Banks
respond to COVID-19 Chairman’s message

I
n a period of uncertainty, it’s time for authorities and regulators to step up. COVID-19 has Cover story: Goldman
certainly developed into an unprecedented situation on a global scale — with potentially Sachs: Leading towards
bigger impacts even than the global financial crisis (GFC) that began in 2008/09. a sustainable future
So, how have central banks responded? We saw during the GFC just how crucial their
interventions are to supporting economies — even if there were criticisms from some that they
were slow to react.
This time, it seems, they have certainly learned from the past. Actions have been rapid, and on
New models for an ESG-
an enormous scale. Commentators like to talk about ‘bazookas’ — they have been used in full
force to date. aware financial system
In China, the People’s Bank of China (PBC) gave a RMB3 trillion injection into the banking
system in the first half of February, with a further RMB20 billion at the end of March 2020,
along with other financing support measures. In the US, the Federal Reserve (Fed) slashed
interest rates by a full percentage point to effectively zero and launched a US$700 billion
package of quantitative easing (QE). This was accompanied by a huge fiscal intervention — the
US$2.3 trillion Coronavirus Aid, Relief and Economy Security Act (CARES). In Europe, the Measurement and reporting
European Central Bank (ECB) extended its QE program by more than EUR750 billion. The ECB
banking Supervisor has also allowed significant institutions to operate temporarily below the
Pillar 2 guidance, the capital conservation buffer, and the liquidity coverage ratio. A delay in the
banking stress test scheduled for this year and in some supervisory activity, have also been
announced to give banks the opportunity to focus on the tasks they need to perform to support
the economy during such a difficult context.
Political and regulatory
In the UK, the Bank of England slashed interest rates by 65 basis points to 0.1 percent,
landscape
expanded its holding of government bonds by GBP200 billion, and made GBP330 billion of
loans and guarantees available to businesses. In Australia, the central bank cut rates by 25
basis points twice during March 2020, to 0.25 percent. It established a swap line with the Fed
for the provision of US dollar liquidity in amounts up to US$60 billion and established a term
funding facility of at least AUD90 billion for SME lending.
Additionally, a deal was agreed between six major central banks including the Fed and the
ECB to lower their rates on currency swaps to help financial markets function normally.
Central banks, regulators and supervisors have been acting more quickly than ever before to
take the necessary measures, overthrowing the limits of the past. They are using all the tools
in their armory to support banks so that they, in turn, can support businesses and families
struggling to survive. Monetary policy interventions, delays and waivers on the application of
banking regulations, and relaxation on the supervisory expectations on the application of some
accounting rules — these are all coming into play.
It is important to underscore that these actions are not intended to help the banks, who were
in a much more resilient position in capital and liquidity that they were in 2008, but to improve
their capability to fund companies, SMEs and people during COVID-19.
Turning to the ESG theme, as the world begins to emerge from the outbreak, the ‘S’ (social)
aspect will become more important than ever. This will be the time for social consciousness
and awareness to play a key role — supporting societies and communities at both a corporate
and individual level. It is a unique opportunity for banks to restore the reputation they lost in the
past crisis, showing how crucial they are in a moment like this. By providing the right levers and
support mechanisms, central banks can smooth the way to a brighter, cleaner future.

60 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Spotlight on COVID-19

Chairman’s message

Cover story: Goldman

Sachs: Leading towards
a sustainable future

New models for an ESG-

aware financial system

Measurement and reporting

Political and regulatory

landscape

61 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Political and regulatory landscape

The politics Chairman’s message

of ESG:
Where are governments heading?
Cover story: Goldman
Sachs: Leading towards
a sustainable future

New models for an ESG-

Rohitesh Dhawan, Eurasia Group aware financial system
Kay Swinburne, KPMG in the UK

P
olitics and the environmental, social and
governance (ESG) agenda are inextricably Measurement and reporting
intertwined. While COVID-19 may have
pushed ESG temporarily to the back-burner,
once the situation abates, financial services
executives will need to understand the new
political environment around ESG if they hope
Political and regulatory
to develop a robust approach.
landscape

62 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Political and regulatory landscape

To find out how COVID-19 is shifting the economic and social implications towards alternative business models
political environment related to the ESG of COVID-19. I suspect — in many which, in turn, slows the development
agenda (and the impacts on the financial ways — this tragic experience will of new ESG-related assets. If that
sector) we sat down with two global thought accentuate the need for greater focus continues, we’ll be on a collision course
leaders on the topic. Kay Swinburne, on ESG investing. Governments are where a groundswell of capital collides
currently KPMG in the UK’s Vice Chair of already starting to think about how with a lack of top-down policy leading to
Chairman’s message
Financial Services, represented Wales in the they can rebuild their economies and a disorderly transition.
European Parliament from 2009 to 2019, many are hoping to achieve that in
during which time she served as Vice Chair a more equitable, sustainable and How is the financial sector being
of the Economics and Monetary Affairs environmental way. used to drive accelerated change?
Committee (ECON). Rohitesh Dhawan is KS — Before COVID-19 unfolded,
I would argue that the EU continues
the Managing Director of Energy, Climate financial services firms in the EU had
and Resources at Eurasia Group, a global
to take a leadership role on ESG. And I Cover story: Goldman
believe we have seen some significant been thrust into the very center of
political risk consultancy, having previously Sachs: Leading towards
action come from them, particularly in the ESG action as intermediaries of
worked with Yvo de Boer, former executive capital flows. The EU doesn’t regulate a sustainable future
terms of greening the financial services
secretary of the UN Framework Convention corporate disclosures itself — that is the
sector. The EU Green Financing Deal,
on Climate Change. job of the individual Member States. But
for example, was a policy response
aimed at creating a taxonomy, setting it does regulate the financial services
Do politicians have the will and space across the EU. And that has made
green benchmarks and enhancing
appetite to drive the ESG agenda the financial sector a valuable tool in the New models for an ESG-
financial disclosures for funds.
forward? EU’s response. Essentially, the EU had aware financial system
Rohitesh Dhawan (RD) — 2020 was What is the risk if politicians do not asked the financial sector to disclose the
expected to be the high point of climate take the lead? ESG footprint of the constituent parts
action. In the preceding months, the of their portfolios. And that was forcing
KS — I think politicians are increasingly
economics of new energies had been them to have tough conversations with
worried that their financial systems and
rapidly improving, investors had been their corporate clients about what they
their businesses will get cut off from
piling in with environmental, social and need to disclose.
global capital flows if they do not rebuild Measurement and reporting
governance (ESG) mandates, there were
their economies in a more sustainable RD — That was certainly the intention
almost daily announcements by global
fashion. BlackRock’s announcement and, once COVID-19 abates, I suspect
corporates for net zero emission goals,
late last year (2019) already made it clear those disclosure requirements will
societal concern was on the up driven by
that some assets will start to become catalyze some players to take action.
civil society actors like Greta Thunberg,
increasingly costly to finance and — But without meaningful policy around
and governments were getting ready for
eventually — economies reliant on fossil targets and expectations, I worry this
the biggest climate policy conference
fuel will find themselves at an incredible will simply become an accounting Political and regulatory
since Paris; COP26 in Glasgow in
disadvantage. endeavor. Depending on how you landscape
November.
measure it, some estimates suggest
RD — Even with reduced political
The disruption from COVID-19 — a that the major oil companies spent
activity on climate change as a result of
sharp global economic slowdown, an oil about one percent of their CapEx
COVID-19, we expect to see increasing
price war and a general battening down on renewable energy investments
climate action this year and beyond.
of the hatches — will affect each of between 2012 and 2018. That was at
Indeed, as growth returns, what
these trends. Climate change will be put a time where oil prices were fairly high
concerns me is that investor appetite for
on the back-burner in 2020. As a result, and it was already very clear that public
ESG-related investments will outstrip
the trajectory of climate change action opinion and investment capital was
the availability of ESG-positive assets
needs to be recalibrated. moving away from fossil fuels. So while
available in the market. And politics and
the narrative around ESG will certainly
Kay Swinburne (KS) — I would policy have a direct role to play in this.
get some momentum from forced
have to agree with Rohitesh. I think disclosures and the like, I think the pace
Without clear government signals and
governments and citizens are currently of the transition is still going to be slow.
policy, companies and businesses
very focused on dealing with the health,
lack the strong incentive to transform

https://www.blackrock.com/uk/individual/larry-fink-ceo-letter
1

63 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Political and regulatory landscape

Are you concerned about what Given the current political climate, Contributors
the Principles for Responsible what is your advice to financial
Investing (PRI) is calling the services executives?
‘inevitable policy response’? KS — While I certainly have faith that
RD — I am very worried about that the political and policy environment
eventuality. Essentially, the PRI will pick up pace towards meaningful Chairman’s message
had already raised concerns before action on the ESG agenda in the coming
COVID-19, that governments would months, I think financial services Dr. Kay Swinburne
executives must recognize that — like it KPMG in the UK
suddenly find themselves forced to
E: kay.swinburne@kpmg.co.uk
act ‘en masse’ and that would leave or not — this shift is happening. The last
Kay is Vice Chair of Financial Services with
investor portfolios open to significant thing you will want is to be left holding KPMG in the UK, and previously served
risk. That, of course, concerns me. a portfolio of stranded assets. So this is as Vice Chair of the European Parliament’s Cover story: Goldman
Not because I think it’s the most likely the time to start planning and rethinking influential Economics and Monetary Sachs: Leading towards
outcome. But rather because I’m your portfolios for the short, medium Affairs Committee, playing a pivotal role in
shaping EU and global financial services
a sustainable future
worried that it would be extremely and long-term.
legislation, including setting up the EU
disruptive to the financial community.
RD — I agree. There are a number of supervisory bodies (ESAs, SSM, SRM),
And I don’t think we’ve seen enough capital markets union (EMIR, MiFID II,
reasons why financial services firms
stress testing and planning for that Prospectus, CCP Recovery & Resolution),
need to continue the march towards
eventuality. and the broader banking union files. Prior
ESG investing and risk planning. But I New models for an ESG-
to Kay’s career as an MEP, Kay worked in
KS — Again, this is where we are think there are going to be some very aware financial system
investment banking. Kay brings a unique
hopefully seeing the EU take the lead. serious challenges that will start to insight to policy ‘behind the scenes’ and
The European Banking Authority, the restrict firms’ ability to execute on their the reality of Brexit in the aftermath of 31
European Insurance and Occupational ESG mandates. This is where politics January 2020.
Pensions Authority and the Prudential and the ESG agenda need to come into
Regulation Authority in the UK had been alignment. And this is why financial
rolling out a series of stress tests to help services executives need to remain very
authorities get a clear understanding of mindful of the political environment as Measurement and reporting
what their constituents’ ESG exposures they plan their ESG strategies.
are. Over the medium-term, I suspect
that will force many banks — particularly
the big multinationals — to take a much Rohitesh Dhawan
closer look at their risk across the globe. Eurasia Group
Rohitesh is Director of Eurasia Group’s
Energy, Climate and Resources practice Political and regulatory
where he covers the (geo)politics of the landscape
energy transition, climate change and the
transformation of the materials economy.
He is a trained economist and geographer
from the University of Oxford and has
been named one of South Africa’s climate
change leaders for his work with the
country’s mining industry.

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Can you build a
portfolio and a Chairman’s message

better world? Cover story: Goldman

Sachs: Leading towards
a sustainable future

It’s decision time. New models for an ESG-

aware financial system

Responsible investing is the way of the future.

It is about creating financial and societal
returns. KPMG professionals can help you Measurement and reporting
invest responsibly and seize opportunities
to create real impact. We can make better
decisions together.

home.kpmg/ItsDecisionTime Political and regulatory

landscape

©2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client
services and is a Swiss entity with which the independent member firms of the KPMG network are
affiliated. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Political and regulatory landscape

The beginning Chairman’s message

of the ESG Cover story: Goldman

Sachs: Leading towards
a sustainable future

regulatory New models for an ESG-

aware financial system

journey:
Asset managers navigate sweeping
Measurement and reporting

EU sustainability regulations
Political and regulatory
landscape
Tomas Otterström, KPMG in Finland and Sweden
Julie Patterson, KPMG in the UK
Riikka Sievänen, KPMG in Finland

A
sset managers are both issuers and
users of financial and non-financial
environmental, social and governance
(ESG) information. Regulations bring both
complexity and clarity — and possible
competitive advantage — to asset managers
who can ride the winds of change.

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Political and regulatory landscape

The winds of change began to stir virtually sustainability into the suitability
every economic sector when the UN Paris assessment of financial instruments, and
Agreement was signed by world leaders increasing transparency of sustainability
in 2016, not long after the UN adopted
their Sustainable Development Goals (UN
benchmarks.1
The Technical Expert Group on
Depending on
SDGs). Those winds have since intensified
for the asset management industry,
Sustainable Finance established to advise the nature of Chairman’s message
first whipping up investor demands
then regulatory pressure regarding their
on the “how to” of elements of the plan
suggested various actions focused on their business,
sustainability or ESG (environmental, social
improving ESG corporate governance and
sustainable finance activities by financial
type of client and
and governance) practices, and now in the
light of COVID-19.
firms, and also a taxonomy defining activities, asset
environmentally-sustainable activities, Cover story: Goldman
The European Commission has issued a European standard for green bonds managers Sachs: Leading towards
an array of regulations that touch every
type of asset manager and investment
and an eco-label for financial products.
The commission is now consulting on a face new a sustainable future
fund, and other types of financial services
firms. Asset managers must satisfy both
renewed sustainable finance strategy,
which takes forward these points.
requirements
regulatory and investor demands to change
the way they invest and report, and the EU rules in force or incoming
at the corporate
products they offer.
The result of this legislative flurry is a
governance, New models for an ESG-
aware financial system
And, given that asset managers are
both issuers and users of financial and
range of rules of significance to an asset
manager, either as a publicly-listed
process and
non-financial ESG information, these company with new ESG disclosure product levels.
regulations bring both complexity and requirements, or specifically relating
clarity — and possible competitive to its role in the design, delivery and
advantage — to firms which can ride the sale of financial services and products.
winds of change. Depending on the nature of their Measurement and reporting
business, type of client and activities,
The landmark Paris agreement, building asset managers face new requirements
on the UN Framework Convention on at the corporate governance, process and
Climate Change, was a defining moment product levels.
for the global response to the threat of
climate change. Its core aim — to limit This constellation of rules reflects
global temperature rise — clearly implies regulators’ attempt to catch up with
Political and regulatory
the need to re-allocate global capital investor demand. For example, by March
towards low-carbon and carbon neutral 2020, the number of asset owners, landscape
investments. The daily evidence of climate investment managers and service
change has added urgency to regulators’ providers that are signatories to the
and investors’ calls for change. Principles for Responsible Investment
had reached 2,515, up nearly 30 percent
The European Commission released an from 2018,2 and it is estimated that global
Action Plan for Financing Sustainable socially-responsible investments grew by
Growth in March 2020, which included 34 percent to US$30.7 trillion from 2016
clarifying institutional investors’ and to 2018, with significant growth in the US
asset managers’ duties, incorporating and Japan.3

1
https://www.unpri.org/news-and-press/european-commission-releases-action-plan-for-financing-sustainable-
growth-/2855.article
2
https://www.unpri.org/signatories/signatory-directory
3
Bloomberg, ‘Global Sustainable Investments Rise 34 Percent to $30.7 Trillion,’ April 1, 2019:
https://www.bloomberg.com/news/articles/2019-04-01/global-sustainable-investments-rise-34-percent-to-30-
7-trillion

67 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Political and regulatory landscape

EU ESG-related regulations include: Devil in the details, definitions

and data
Such surging demand for responsible
investments is critical to help meet the
The Non-Financial Reporting Directive has required companies Paris Agreement and the UN SDGs,
but it also speaks to the need for shared Chairman’s message
with more than 500 staff to report on their social and environmental
challenges since financial year 2017. The Commission’s updated regulations and guidelines to channel
reporting guidance increases the focus on climate-related business capital effectively.
risks and opportunities. Asset managers are at the center
of this challenge but face diverse
The Sustainability-Related Disclosures Regulation requires approaches and inconsistent definitions Cover story: Goldman
investment firms and asset owners to make disclosures on the of sustainability concepts by asset
Sachs: Leading towards
integration of ESG risks and to consider adverse impacts on their owners, jurisdiction, business sector,
and professional or industry standards- a sustainable future
investment processes and remuneration policies. Firms will also
be required to disclose ESG factors and impacts on their products, setting bodies. Without consistent
including any type of investment fund, insurance‑based investment definitions, it is difficult to determine the
product and personal pension products. Most of these rules come data points required to set comparable
into force in March or June 2021, and by end-2022 investment targets, monitor investments, and
funds must additionally disclose adverse impacts. measure and compare performance New models for an ESG-
against peers, let alone across the aware financial system
financial services sector, industries, and
The Taxonomy Regulation sets out a common classification national or regional borders.
system for economic activities to be considered environmentally-
sustainable with focus on sectors that play a key role in climate Moreover, asset managers must
change mitigation and adaptation. It also requires that the perform this in-depth data collection to
economic activities do no significant harm with respect to five satisfy their own corporate reporting
other environmental objectives. requirements, to conduct appropriate
Measurement and reporting
investment and risk management
decisions, and to make disclosures to
‘Suitability’ rules have been amended to require a client’s ESG clients and fund investors.
preferences to be taken into account by investment advisers and
insurance intermediaries. These amendments will take effect with The challenge is compounded by the
the disclosures regulation. fact that, for a typical asset manager
that invests in multiple, distinct asset
classes, industries and geographies, Political and regulatory
The Benchmarks Regulation has been amended to create two there are endless subsets of relevant landscape
new benchmarks — EU Climate Transition and EU Paris-aligned — ESG considerations, which depend on
to help increase transparency and prevent greenwashing. Different underlying data for informed and accurate
aspects of these rules take effect on dates from April 2020 to decision-making.
January 2022.
Committing to the sustainability
Stress testing rules for banks: The Commission is developing journey
tools and mechanisms to integrate ESG factors into the EU banking Although this shift to integrate
prudential framework, banks’ business strategies, investment sustainability into investing may seem
policies and risk management processes. overwhelming, it is critical to recognize
it as a journey or transition, rather than
Eco-label for retail investment products: The Commission is an immediate outcome. Every asset
drawing up proposals for an eco‑label for certain financial products, manager should establish its overarching
such as ‘sustainability funds’ and ‘green bonds,’ to enable investors vision and strategy, identify opportunities
more easily to direct their monies into sustainable investments. and risks, and adjust its investment
principles and process to achieve those
goals. Investors will expect nothing less.
Visit KPMG Regulatory Horizons for an overview of current and
expected financial services regulations.

68 | Frontiers in Finance © 2020 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Political and regulatory landscape

An in-depth business-driven roadmap incorporate the current compliance Contributors

can then be developed, to manage the imperatives in their operations
business opportunities and risks that and reporting mechanisms, while
sustainable finance and responsible simultaneously managing the impacts
investment brings. The roadmap will of COVID-19, they are exploring ways to
cover ESG integration into governance anticipate future direction of sustainable
Chairman’s message
and organization, as well as key business investment.
processes such as compliance, risk Tomas Otterström
For example, some European financial
management, product development, KPMG in Finland
services firms have already made
investment management, data E: tomas.otterstrom@kpmg.fi
attempts to apply the preliminary
management and analysis, investee With over 20 years of work experience
Taxonomy Regulation to their portfolios. as a consultant and asset manager,
relations, investor relations, sales and
reporting.
This proactive approach enables firms Tomas has worked with dozens Cover story: Goldman
to gain an early understanding of the of institutional investors and asset Sachs: Leading towards
In order to set the ambition level changes needed to their operations management companies to understand
and integrate ESG into their investment
a sustainable future
and appropriate targets, a good and positions them as credible, trusted
understanding of the changes in the partners with regulators, to help shape policies, and measure the impact of
this for their business. He is the KPMG
operational environment and internal future rules.
Global Leader for Sustainable Finance,
capabilities will be needed. This is likely and leads the Sustainability Services
Asset managers’ journeys to full
to include assembly and consideration of practice at KPMG in Finland and
regulations, standards and good practice;
sustainable finance cannot be slow, New models for an ESG-
KPMG in Sweden.
given investor demands and mounting aware financial system
analysis of client expectations; evaluation
regulations. But the end-game is not
of peer approaches; analysis of current
known and the transition cannot be too
state with regard to work streams; and
quick. Expectations and standards are still
assessment of management views and
evolving and abrupt change could pose
the organization’s expertise.
risks for economies and individuals, and
Targets, actions and a monitoring plan therefore for clients’ portfolios, against
can then be defined, and the necessary the difficult backdrop of post COVID-19 Julie Patterson
KPMG in the UK
Measurement and reporting
capabilities developed. These efforts economic recovery.
E: julie.patterson@kpmg.co.uk
should be synchronized across the asset Julie has specialized in the asset
However, if the necessary convergence
manager’s business units, functions and management and funds sector for
of regulations and standards can be
asset classes, to ensure efficiency and nearly 20 years, having previously
achieved, asset managers could benefit worked at the UK Investment
consistency. Flexibility and adaptability
from common rules that are clear but Association and as a regulator. She has
are paramount, given that ESG rules,
not unnecessarily prescriptive. And, with extensive knowledge of EU regulation Political and regulatory
standards and stakeholder expectations
definite investor momentum behind and national market structures, produces
will continue to evolve.
sustainable investing, there is a real thought leadership on the evolving landscape
With this approach, KPMG member business opportunity — and competitive regulatory context, and is KPMG’s global
firms have already seen some clients advantage — for those asset managers lead on Brexit for the sector.
successfully advance through each stage that make their way from a minimum
of their sustainable finance roadmap. compliance approach to the front of the
While most are seeking to absorb and pack, on the sustainable finance journey.  

Riikka Sievänen
KPMG in Finland
E: riikka.sievanen@kpmg.fi
Riikka coordinates KPMG Finland’s
Sustainable Finance services, including
ESG in Investor Relations and is the
Working Group Lead of Sustainable
Finance Services within the KPMG
network. She also acts as an Advisor
to the EU Technical Expert Group on
Sustainable Finance. In her daily work,
Riikka supports institutional investors,
asset managers and banks with
sustainability and ESG at the levels
of strategy, practice, reporting and
assessment.

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is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Publications
KPMG member firms provide a wide-ranging offering of studies, analysis
Chairman’s message
and insights on the financial services industry. For more information,
please go to kpmg.com/financialservices

Sustainable investing Pulse of Fintech H2 2019

KPMG International, CREATE-Research, Analysis of the latest global trends in
Sustainable AIMA and CAIA Association, examine Pulse of venture capital, M&A and PE investment Cover story: Goldman
investing: in detail sustainability investing and its Fintech activity in the fintech sector. In this edition,
fast-forwarding its evolution
H2 2019 Sachs: Leading towards
impact on the alternative investment we feature 2020 trends and perspectives
industry. The research includes insights on how IoT is creating opportunities for a sustainable future
from 135 institutional investors, hedge fund fintech, and alliances between ‘big techs’
February 2020
managers, asset managers and pension and traditional FIs.
consultants in 13 countries in all the key
home.kpmg/sustainableinvesting

regions.
February 2020

New models for an ESG-

The future is open: Reshaping the banking Operational excellence in insurance
experience KPMG and ACORD launched a survey report
aware financial system
Banks today face profound industry on operational efficiencies to understand
challenges, even so, we believe the future where insurance companies are on their
is open with opportunities. This 10-part transformational journey and where they are
article series cover a range of topics related heading. A majority are falling behind and a
to technology innovation and disruption, lack of process standardization and strategic
providing practical insight into how banking vision is the primary obstacle to future
executives can leverage the trends for transformation efforts. Measurement and reporting
sustainable competitive advantage.

Getting digital right The future of payments

Asset managers’ views on the benefits of Views from global industry leaders —
Getting ‘going digital’ are wide-ranging, but broadly 10 predictions panning banking, technology, the fintech
digital right for the future
How asset managers can deliver
they are seen under the following 3 target of payments sector and regulation — about how they
outcomes: Improving client engagement, view the future of payments in respects to
more value from digital
How will the payments industry
stay ahead of the time zone?

Political and regulatory

#futureofpayments

Improving efficiency and controls and regulation, economics, social, technology

Improving business management. and operations. landscape
KPMG International October 2019

home.kpmg/goingdigital www.kpmg.com/uk/futureofpayments

Implications of COVID-19 for financial Mind the Gap: Women in Financial

services Services Leadership
Resources for financial institutions to help Mind the Gap is a blog series that features
them navigate current challenges and best interviews with Laura Hay, Global Head of
position their business for a new reality post Insurance, and women executives from
COVID-19. Content provides in-depth insights the financial services industry around the
through articles, blogs, podcasts and videos. world. Laura and her guests discuss their
career progression, professional failures
and successes as well as a variety of other
topics.

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Missed an issue
of Frontiers in Finance? Chairman’s message

Cover story: Goldman

Sachs: Leading towards
a sustainable future
Frontiers Frontiers Frontiers
in Finance
Issue #61
in Finance in Finance
Issue #59

Issue #60
Workforce shaping
Reshaping financial services Risk proofing the future
On the cover

New models for an ESG-

On the cover Shenaz Khan, Westpac, page 8
On the cover
Harinder Takhar, Paytm Labs, page 6 Andrea Pozzi, Grupo Santander, page 6 Featured interviews
Featured interviews Aileen Tan, AIA Singapore, page 28
Featured interviews

aware financial system

Voices on 2030, page 13 Katie Casey, Charles Schwab, page 40
Julian Johns, Trunomi, page 51
Ranjana Clark, MUFG, page 22 Sam White and Will McDonald, Aviva, page 50
Karina Whalley, AXA Global Parametrics, page 59
Harit Talwar, Goldman Sachs, page 35

October 2019

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Measurement and reporting

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Contacts

James P. Liddy Simon Gleave Francisco Uría Fernández

Global Chairman Regional Coordinating Partner Coordinating Partner
Financial Services Financial Services Financial Services
KPMG International ASPAC region EMEA region
Partner KPMG China KPMG in Spain
KPMG in the US T: +86 10 8508 7007 T: +34 6797 98839
T: +1 212 909 5583 E: simon.gleave@kpmg.com E: furia@kpmg.es
E: jliddy@kpmg.com

Laura Hay Andrew Weir Judd Caplain

Global Head of Insurance Global Head of Asset Management Global Head of
KPMG International KPMG International Banking and Capital Markets
Partner Partner KPMG International
KPMG in the US KPMG China Partner
T: +1 212 872 3383 T: +852 2826 7243 KPMG in the US
E: ljhay@kpmg.com E: andrew.weir@kpmg.com T: +1 212 872 6802
E: jcaplain@kpmg.com

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Publication name: Frontiers in Finance
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Publication date: May 2020