„It is essential that the professional advisory sector is providing support with ESG. It would be impossible for individual financial sector actors to manage all the requirements, especially now, as there is a substantial amount of sustainable finance regulation in force at the EU level.”
Riikka Sievanen leads sustainable finance and responsible investment services at KPMG in Finland since 2013. In her daily work she supports international and domestic institutional investors and financiers with environmental, social and governance (ESG) across the whole process. While at KPMG, she has led KPMG’s Global Sustainable Finance working group and advised the European Commission’s Technical Expert Group (EU TEG) on sustainable finance. In her spare time, Riikka is a post-doctoral researcher at the University of Helsinki with specialization on institutional responsible investment. Next to academic research she has written three handbooks on responsible investment with three other authors (link to the latest contribution: The Responsible Investor: An Introductory Guide to Responsible Investment (routledge.com)). She has been on the board of Finsif, the Finnish Sustainable Investment Forum, and has been Finsif’s representative in Sitra’s National Steering Group for Impact Investments.
We had the pleasure and opportunity to discuss with Riikka Sievanen from KPMG the past and present of ESG and get a little insight from the advisory sector about the current trends.
When did you first meet with the term ESG? What were your first thoughts about it?
My first connection with ESG was in one of my previous jobs, in which I was a Research Manager responsible for the company’s financial market research programs. We were planning the next round of the program, and one of the trends was ESG, or actually at that time, around 2005, the words used were environmental, ethical and social considerations. I noticed that I became quite interested in these. At that time, I was also a doctoral researcher at the University of Helsinki. In the end, I actually re-made my research plan and focused on ESG. When I was revising the research plan, I interviewed Anna Hyrske who was the responsible investment lead at Ilmarinen pension fund in Finland (among the largest ones in Finland), and asked if she could tell me what responsible investment meant. I believe that it was in that interview when the term ESG became very familiar to me. As a result of the revised research plan, the topic of my dissertation became “Exploring the drivers of responsible investment in European pension funds”.
You are working at KPMG one of the world’s BIG4 companies – how important is it for the professional advisory sector to be involved in ESG?
I started at KPMG ten years ago and have led our responsible investment and sustainable finance services since that time. In the very beginning, it was only pension funds and some asset managers that were interested in responsible investment, meaning considering ESG (environmental, social and governance factors) in their investment decision-making for the benefit of return-risk profile of their portfolios. In the recent years, it is difficult to find financial sector actors who are not interested in ESG. This means that banks and insurance companies have also become active, as well as some foundations.
It is essential that the professional advisory sector is providing support with ESG. It would be impossible for individual financial sector actors to manage all the requirements, especially now, as there is a substantial amount of sustainable finance regulation in force at the EU level: the EU taxonomy, Sustainable Finance Disclosure Regulation (SFDR) and Low-carbon benchmarks. In addition, the new Corporate Sustainability Reporting Directive (CSRD) is covering many financial sector actors too, meaning that they also need to get ready to report on their ESG more widely, not focusing on the portfolio side only, but rather on their corporate sustainability. The EU Green Bond Standard is also something that both the financial market and also companies from other sectors are waiting for.
I loved the title of your presentation: “Responsible Investment for Newbies and Seasoned Professionals” – without spoilers – is it possible to address both audiences (the more experienced and the new generation) with the same buzz words?
I believe it is! The seasoned professionals may be willing to revisit their policies and practices to ensure their responsible investment practices, follow global leading standards and latest trends. The newbies may benefit from finetuned ideas, concepts and practices, meaning that they can get into the deeper level of ESG fairly fast and benefit from the learning curve that took a longer time with the pioneers.
Is it still difficult to balance between the previous standards and the new ESG driven regulations? Or are we getting more and more used to the importance of sustainability? Is there a story or anecdote you would like to share which could give us a little insight about the challenges and/or the rewards of your daily work?
The starting point of responsible investment is the investor’s values – which may be focused more on values that appreciate e.g. environmental, social or financial factors. This makes responsible investment heterogeneous and it has been challenging to have global standards. The Principles for Responsible Investment (PRI), which is the largest global responsible investment initiative has the yearly reporting round for its signatories. Although the reporting framework has evolved throughout the years, one can consider it to be a global reporting standard for responsible investors.
In my view, ESG (and sustainability, which is the word used to typically mean corporate sustainability) is something that is part of the quality of how an organization invests and functions.
When it comes to my work, I’d say that the clearly most rewarding parts of my work are of course the clients across the markets with whom I have the possibility to work with. ESG is close to my heart so this means that I’m also truly interested in finding solutions to the clients’ situations. And of course in the end, the very best is when a particular challenge or problem has been solved and the client is happy.
What are the main trends you are expecting in the advisory sector regarding ESG? Where do you think there is still room for improvement?
I have been a fan of Rockström et al. (2009) and their planetary boundaries: the researches have defined planetary boundaries for the Earth, from selected megatrend points of view. Their research shows that for example biodiversity loss is on a highly alarming level compared to climate change. Throughout the years I’ve been recommending to clients that they’d get prepared to consider not only climate change and biodiversity, but also e.g. chemical pollution, nitrogen cycle and ocean acidification. I know that it may be challenging due to missing ESG data, but one needs to get started from somewhere.
