KPMG expands ESG services

KPMG has been increasing its efforts to provide environmental, social and governance services to clients through a new initiative called KPMG Impact.

The team will help clients improve their ESG performance while also carrying out KPMG’s own ESG commitments. Last year, KPMG U.S. worked with other businesses, investors, standard-setters, non-governmental organizations and international organizations through the World Economic Forum to create a set of 21 core metrics for companies to disclose their progress in the ESG areas of people, planet, prosperity and governance. KPMG has adopted those same metrics to guide its actions and measure and report its progress.

The move comes as more accounting firms wade into providing ESG reporting and assurance services for clients. ESG funds have become a popular vehicle for investors, and the Securities and Exchange Commission is weighing requirements for climate risk disclosures by companies. At the same time, at the global level, securities regulators around the world are pushing for greater consistency in reporting ESG metrics, encouraging standard-setters to align their various standards and frameworks more closely together. The International Financial Reporting Standards Foundation has been working on creating a proposed International Sustainability Standards Board that it would oversee alongside the International Accounting Standards Board. IFRS Foundation trustees explained how the structure would work during a webinar Wednesday.

This move toward greater sustainability reporting and assurance is one that KPMG has already been working on for years, but it’s taken on greater urgency as climate change risks appear to have grown with rising temperatures seen in the U.S. and across the globe.

“At the highest level for us, the backdrop for the rise of ESG is it’s all about trust,” said KPMG Impact leader Rob Fisher. “You see people looking to business as an ethical and effective leader to bring ESG aspirations to life, and the recent decline in trust that we see across institutions like government and media and so on affects our ability to come together and solve problems. That’s why a focus on organizations doing well across environmental, social and governance dimensions can really build trust with customers, employees, investors, regulators and really all stakeholders. We think ESG engagement will make businesses better by unlocking new value, building resilience and driving profitable and measurable growth both today and tomorrow.”

He has been working with clients on taking individual approaches to ESG reporting. “As I think about specific client conversations that I’m having, it’s that every business across all industries is on a unique ESG journey that reflects its stakeholders, challenges and opportunities,” said Fisher. “Effective engagement really has to be embedded throughout a company’s entire strategy and operations. Many of the clients we are working with are actually the leaders in their industries in areas like climate, the environment, social justice and so on, but they’re still looking for our help in how they bring it all together and figuring out the opportunities to improve.”

ESG encompasses not only the environment, but also social initiatives like diversity, equity and inclusion, and the firm is helping clients with those efforts as well. That includes providing assurance services.

“There are four big buckets of work that we’re doing for clients,” said Fisher. “One, we’re helping clients develop a broader ESG strategy, and then the second part is how do you operationalize that strategy. We’re seeing a lot of interesting opportunities around transformational opportunities and the ability to create some value, and we’re really seeing financial institutions and private equity leaning in because of that. There’s a ton of investor demand in that regard. The fourth bucket is around helping companies figure out how to measure it, report it, and assure it. Certainly there are a number of different standards and different frameworks and metrics for reporting ESG data, and we’re really working with clients to help them understand, based on perhaps the specific interests of particular investors or the industry that they’re in, what frameworks are going to make the most sense to help them develop capabilities to measure their return on their ESG [efforts]. You want it to be accurate and fit for purpose disclosure type of reporting.”

Last month, KPMG submitted a comment letter to the SEC in response to the SEC’s request for public input on climate change disclosures. “Ours is really about a building block approach at a high level,” said Fisher. “We support a global baseline. Then there would be supplemental standards to serve specific jurisdictional needs. I think the importance of some sort of consistency at the global level is that, if we don’t have that, disclosures will be less consistent and comparable. Registrants are operating across multiple jurisdictions and their supply chains and their customer base are certainly going to be global. We really think it has to start with a baseline and then additional disclosures that would be necessary in the context of the U.S.”

Becker Professional Education has been seeing growing demand for its Continuing Professional Education courses on ESG, with Tim Gearty, national director and editor-in-chief at Becker, conducting 40 to 50 sessions per month on ESG for companies across industries.

“Europe seems to be taking the lead on this,” said Gearty. “We in the United States are catching up quickly, but the European Union clearly took the lead on this, and they’re pushing ahead. We’re still in a catchup mode, but we have a lot of great thought leaders that are working very diligently to make sure that our standards are ultimately measurable and that assurance can be given to them. One of the critical items is we have to be able to measure those standards both qualitatively and quantitatively before assurance can be given.”

Groups like the American Institute of CPAs, the Institute of Management Accountants, the International Federation of Accountants, and the Association of Chartered Certified Accountants have been encouraging members to get involved in ESG reporting. The ACCA published a new report Wednesday, “Rethinking Risk for the Future,” examining the role of the accounting profession in effective risk management amid the crises presented by climate change, the COVID-19 pandemic, and the resulting economic turbulence. The report discusses how accountants can help organizations not only detect and better understand the emerging risks and opportunities facing them, but also cultivate the mindsets needed to think in more of a long-term perspective.

The IFRS Foundation is aiming to establish the proposed International Sustainability Standards Board by November in time for the United Nations COP26 Climate Change Conference in Scotland, after recently receiving endorsements from the G-7 finance ministers and the International Organization of Securities Commissions. “There is a timeline we are working toward,” said IFRS Foundation vice-chair Larry Leva during Wednesday’s webinar. “There are now less than four months until the COP26 conference in November. … We still have a tremendous amount of work ahead of us, but we remain on track to make a final decision in advance of the COP26 meeting in Glasgow. We have received a great deal of support and goodwill for this work, and there is a real determination to make this happen.”

“This is an area that our profession is best positioned to be working, whether it’s internally reporting on it or working externally to give assurance on it,” said Gearty. “We’re understanding the demand because the demand for ESG is coming from the SEC, national business councils, the World Economic Forum, the AICPA, the Global Reporting Initiative, the European Union, and of course asset managers for these funds. They’re all demanding standards, so whether it’s a sustainability fund or just a report that’s being issued by a company, they can be ultimately verifiable so the individuals in the public can rest assured that the information is accurate and not manipulated.”