CCO Insight: Compliance and ESG

Recent events have shown us the criticality of core tenets of ESG, and the need to operationalize and execute an effective ESG compliance program. I again had the pleasure to host a cross-industry group of chief ethics and compliance officers (CECOs or CCOs) to discuss. Recognition of the actions to take include:

Integrating Compliance & ESG:

• Integrate Compliance as a key member in ESG governance committees within the firm
• Expansion of ESG to “EESG” (E=Employees) due to the critical focal role in ESG
• Ensure that ESG compliance is a standing topic in Risk & Compliance governance meetings
• Define ESG goals and create a framework to embed within compliance governance
• Leverage the company’s materiality assessment to prioritize Compliance efforts in ESG

ESG Metric Veracity:

• Assess current metrics and/or develop new metrics that are aligned to established ESG areas of focus within the firm
• Define owners of ESG related data and develop a control framework to routinely assess the data
• Determine which Compliance metrics to publish externally and the level of transparency to provide
• Conduct on-going monitoring & testing of ESG metrics

Executing Effective ESG Compliance:

• Internally monitor ESG disclosures and marketing for accuracy and consistency
• Integrate regulatory ESG evaluation criteria for residual and inherent risk into compliance risk assessments
• Update the firm’s compliance program to include ESG risks in areas such as training & communication, policies and procedures, reporting, issue management, etc.

KPMG Perspective

To drive forward an effective ESG program and an effective compliance program for ESG, it is important to ensure strategies and processes align. To do so requires an intentional incorporation of ESG across all facets of the compliance program, which will help operationalize ESG compliance, into such areas as compliance risk assessment, monitoring/testing, and controls.

Relevant Thought Leadership