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      ESG and Investor Relations

      Investors are taking a growing interest in the environmental, social and governance (ESG) performance of the companies they invest in.

      The scrutiny doesn’t only come from the growing market of responsible investors; mainstream investors are also looking more closely at ESG, as they begin to look beyond short-term investment horizons to the creation of longer term shareholder value.

      Issues like modern slavery, financial climate risk, energy transition, responsible tax practices and impact investment were simply not part of investors' vocabulary just a few years ago. Today, these issues are commonly discussed – and reflect the way in which companies respond to the ESG expectations of their investors, which has growing implications for the cost of capital.

      Analysts expect this trend to accelerate as the socially-conscious generations who grew up with global challenges, such as climate change and growing inequality, begin to wield greater investment power. So, now more than ever, it's critical for companies to engage with investors on ESG and shape their ESG messages to meet investors' expectations.

      KPMG has a network of ESG and investor relations specialists who can help your company enhance its ESG communications with investors and improve your performance in key ESG indices and rankings.

      How we can help

      KPMG can provide bespoke ESG investor relations services to suit the needs of individual clients. Our support typically covers the following areas:

      • Analyze the ESG expectations of your investors;
      • Assess how your company meets your investors' ESG expectations;
      • Understand how your investors perceive your ESG performance and strategy;
      • Improve the quality of your ESG investor communications;
      • Prioritize ESG indices and rankings and improve your performance;
      • Evaluate your organization against your competitors.

      Green bonds and social bonds

      Green bonds and social bonds are taking off as the investment vehicle of choice for the private and public sectors to finance projects with environmental and social benefits, such as clean power, low-carbon transport, energy efficient buildings, and affordable housing and infrastructure.

      Green bonds have proved attractive to the growing number of investors with an interest in sustainable investment options and are generally oversubscribed. No wonder the labelled green bond market grew by an average of 60% per year between 2015 and 2020, with a record-breaking US$270 billion worth of bonds issued in 2020 alone, despite difficult economic circumstances due to the COVID-19 pandemic.

      This increase in volume is also being fueled by an increased standardization effort by regulators and market participants (e.g. the development of the new EU Green Bonds Standard).

      While most green bonds are issued by banks, it is increasingly common for corporations to issue their own bonds. Big brands in the technology, utilities, automotive and consumer products sectors are among those that have done so.

      Along with the advantages, there are also challenges and uncertainties for green and social bond issuers as the market is still new (the first green bond was issued in 2007). Many organizations can benefit from expert advice on how to navigate the pitfalls or from independent assurance on ways to maximize the credibility and appeal of their bonds.

      How we can help

      Our network of advisory and assurance professionals has solid experience in supporting clients on green bond issuance and offer a range of services to support you during the lifecycle of your green or social bond.

      1. Review financing options: KPMG professionals review and challenge your financing objectives and alternatives, enabling you to optimize the capital structure and make the most of debt market appetite. KPMG specialists can help determine a preferred funding route and act as a sounding board for your management team.
      2. Design green bond criteria: KPMG specialists can help you develop a green or social bond framework, “green” or "social" criteria and specifications for the management of proceeds. KPMG professionals advise on project selection and evaluation, fund management processes and controls, and we benchmark your processes against industry best practice and evolving standards.
      3. Execution: KPMG professionals advise on the presentation of your business’s credit story and green or social credentials to potential investors, the issuance process of the debt and liaison with stakeholders including credit rating agencies.
      4. Ongoing stakeholder management: KPMG specialists can help you assess the performance of a green or social bond through independent bond investor studies, giving you unbiased insight into bondholders’ perspectives and into the profile of bondholders.
      5. Third-party independent assurance: To increase the credibility of the bond, KPMG professionals can provide assurance on the issuer's processes and controls for selecting green or social projects and managing proceeds, as well as on the issuer's progress reports.
      6. Monitoring and reporting: KPMG specialists can help you develop performance indicators and project evaluation metrics to monitor and report on the financial, environmental and social outcomes of projects. We support you in reporting to your company’s internal and external stakeholders.

      Sustainable finance

      ESG (environmental, social, governance) has risen to the top of the regulatory agenda. Fears that it would fall off the radar due to the COVID-19 pandemic have been quashed as the crisis has highlighted that business sectors are deeply interconnected across borders, that societies of all types and wealth levels are vulnerable, and that the environment is under increasing strain. There is strong momentum to change the financial services landscape for the better. However, firms need to balance improving their ESG credentials with the need to survive the impacts of the crisis and manage issues such as credit risk, cost reduction and consolidation.

      For banks and insurers, the financial risks of climate change are in sharp focus as regulators set out expectations for stress testing and climate risk management. Asset and fund managers and asset owners are being required by regulators and investors to embed sustainable investment throughout their businesses and to consider the full spectrum of ESG.

      The search for consistency remains a priority. The key to achieving this, and to enabling the development of reliable market data, will be standardized definitions of E, S and G, globally. Recognizing the challenges that companies are facing in making ESG disclosures, standard-setting bodies are seeking to enhance and align their approaches to corporate reporting, both financial and non-financial. And in the EU, the definition of E is now enshrined in law.

      How we can help

      Our professionals offer bespoke responsible banking services, tailored to match differing needs and levels of maturity. We offer a range of services to support you in adopting responsible banking practices:

      1. Identify ESG risks and opportunities;
      2. Develop your strategic ESG approach and roadmap;
      3. Help your bank comply with existing and upcoming ESG regulations;
      4. Implement responsible banking across business and functions;
      5. Design and implement an appropriate monitoring and reporting framework.

      Get in touch

      We'd love to hear from you. Get in touch with one of our professionals, specialist groups or KPMG offices.

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