Government leadership catalyst for success | KMPG
Leading by example drives government transformation
Environmental, Social, and Governance: Government leadership as a catalyst for success July 2022 Leading by example drives government transformation
Defining ESG Content A legacy of leadership 3 What’s new? 4 ESG refers to a framework that integrates environmental, social, and governance risks and opportunities into an organization‘s strategy. The ESG imperatives in government 6 ESG movement has quickly evolved from socially responsible investing to a global imperative, affecting not only investment decisions and shareholders but also business strategy, the global economy, and Urgent priorities 7 people around the world. For governments, the goal is to build long-term sustainability and achieve desired outcomes for Four roles of governments in addressing ESG 9 constituents and other stakeholders. ESG includes a wide range of categories to assess the impact of a government agency‘s services and practices on the planet and society. Key considerations 13 ESG factors include: • Environmental criteria to examine how an From pain to purpose 14 agency performs as a steward of the natural environment • Social criteria to examine how an agency treats Shifting the mindset, reaping the benefits 15 people, including its employees and the communities in which it serves or operates • Governance criteria to examine how an agency Governments in action 17 holds itself accountable and is governed. Now is the time 18 KPMG stands ready to help 19 About the research 20 1 Environmental, Social, and Governance: Government leadership as a catalyst for success Environmental, Social, and Governance: Government leadership as a catalyst for success 2 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Defining ESG Content A legacy of leadership 3 What’s new? 4 ESG refers to a framework that integrates environmental, social, and governance risks and opportunities into an organization‘s strategy. The ESG imperatives in government 6 ESG movement has quickly evolved from socially responsible investing to a global imperative, affecting not only investment decisions and shareholders but also business strategy, the global economy, and Urgent priorities 7 people around the world. For governments, the goal is to build long-term sustainability and achieve desired outcomes for Four roles of governments in addressing ESG 9 constituents and other stakeholders. ESG includes a wide range of categories to assess the impact of a government agency‘s services and practices on the planet and society. Key considerations 13 ESG factors include: • Environmental criteria to examine how an From pain to purpose 14 agency performs as a steward of the natural environment • Social criteria to examine how an agency treats Shifting the mindset, reaping the benefits 15 people, including its employees and the communities in which it serves or operates • Governance criteria to examine how an agency Governments in action 17 holds itself accountable and is governed. Now is the time 18 KPMG stands ready to help 19 About the research 20 1Environmental, Social, and Governance: Government leadership as a catalyst for successEnvironmental, Social, and Governance: Government leadership as a catalyst for success2 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
A legacy of leadership Governments have a long history of leading efforts to improve what we now call ESG issues—setting green In fact, constituents regard governments as most standards, defining supplier diversity programs to combat social injustice, and establishing supply chain responsible for addressing ESG concerns—more so reporting and metrics, among other achievements. What’s new? than corporations or individuals. In our rank-order poll on who individuals regard as primarily responsible for For more than 50 years, the federal government’s addressing environment and social issues, 54 percent immense purchasing power and role in procurement of respondents say the federal government, followed has created and accelerated new markets for by state government at 48 percent, individuals (31 sustainable products and services. When the goal is percent), local governments (29 percent), Key forces are driving the need for all levels of set to convert 600,000 vehicles to a 100 percent zero- corporations (23 percent), and international government—federal, state, regional, local, and tribal— 4 emission electric fleet—per the executive order organizations (15 percent). to focus on ESG now. COVID-19, social and economic issued by the White House in 2021—it sends a clear pressures, and other disruptions have reinvigorated 1 On the whole, governments' engagement with signal for market demand. broad-based discussions of diversity, equity, and environmental and social issues affects people’s inclusion (DEI). Governments are being held approval of governments and their representatives— accountable by employees, constituents, and society only 8% of respondents say it does not affect their generally, to urgently address heightened climate approval at all.Respondents ranked data privacy and events, advance equity for all, and drive positive social security as the most important ESG issue to them (72 change. percent), followed by affordability and accessibility (70 As the modern ESG percent), yet the majority (60 percent and 61 percent, Increasing risks—from extreme weather to infectious respectively) indicated they are less than satisfied with diseases to social cohesion strains—can have 5 movement evolves, how government is addressing the issues. compounding consequences and a profound impact on mission achievement at all levels of government. governments now have In addition to those of constituents and employees, Additionally, the mounting costs of such risks— the heightened expectations of credit rating agencies including natural disasters, cyber-attacks, excess an opportunity to build make ESG a business imperative that cannot be medical care expenses, and health disparities—drive ignored. In March 2022, credit rating agency S&P greater urgency for action on ESG. on a foundation of Global Ratings (S&P) published its first ESG Credit Indicator Report Card for U.S. states and territories, Juxtaposed against these urgent needs is the reality leadership and answer a which reflects S&P’s opinion of the influence that ESG that public trust in government as an institution is 6 factors have on their credit rating analysis. broader call, with an declining in the U.S. and in many countries across the globe. According to the 2022 Edelman Trust Recent landmark federal funding programs include Barometer, the U.S. trust index—the average percent observable shift in the ESG-related investments, as well as incentives to spur trust—in governments in 2022 was just 42 points, ESG-related action by state and local governments. For 2 down 10 points since 2017. way they have typically example, the Infrastructure Investment and Jobs Act (IIJA), enacted in November 2021, includes significant Importantly, the U.S. public generally values and led on ESG issues. investments in carbon reduction, electric vehicle expects governments’ involvement and action related charging infrastructure, broadband infrastructure, and to ESG issues—and wants governments to take more supply chains for clean energy technologies. To action. In February 2022, KPMG LLP (KPMG) position for competitive grant opportunities that are conducted a survey of the U.S. public to examine part of the program, state and local governments will individuals‘ sentiments on governments‘ approach to need to demonstrate that they will be good stewards ESG. While about 7 in 10 individuals indicate that of the funding from an ESG perspective. governments should play a leading role in solving environmental and social issues, only 35% agree or Governments have the opportunity to seize this strongly agree that the governments are taking the moment to reestablish their role with respect to 3 appropriate amount of action to solve these issues. driving gains on major ESG issues. 5 2 Ibid. 1 2022 Edelman Trust Barometer Fact Sheet: President Biden Signs Executive Order Catalyzing America’s Clean 3 6 KPMG survey among U.S. residents S&P Global, ESG Credit Indicator Energy Economy Through Federal Sustainability 4 Environmental, Social, and Governance: Environmental, Social, and Governance: Government Ibid. Report Card: US States And Territories 3 Government leadership as a catalyst for success leadership as a catalyst for success 4 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
A legacy of leadership Governments have a long history of leading efforts to improve what we now call ESG issues—setting green In fact, constituents regard governments as most standards, defining supplier diversity programs to combat social injustice, and establishing supply chain responsible for addressing ESG concerns—more so reporting and metrics, among other achievements.What’s new? than corporations or individuals. In our rank-order poll on who individuals regard as primarily responsible for For more than 50 years, the federal government’s addressing environment and social issues, 54 percent immense purchasing power and role in procurement of respondents say the federal government, followed has created and accelerated new markets for by state government at 48 percent, individuals (31 sustainable products and services. When the goal is percent), local governments (29 percent), Key forces are driving the need for all levels of set to convert 600,000 vehicles to a 100 percent zero- corporations (23 percent), and international government—federal, state, regional, local, and tribal— 4 emission electric fleet—per the executive order organizations (15 percent). to focus on ESG now. COVID-19, social and economic issued by the White House in 2021—it sends a clear pressures, and other disruptions have reinvigorated 1 On the whole, governments' engagement with signal for market demand. broad-based discussions of diversity, equity, and environmental and social issues affects people’s inclusion (DEI). Governments are being held approval of governments and their representatives— accountable by employees, constituents, and society only 8% of respondents say it does not affect their generally, to urgently address heightened climate approval at all.Respondents ranked data privacy and events, advance equity for all, and drive positive social security as the most important ESG issue to them (72 change. percent), followed by affordability and accessibility (70 As the modern ESG percent), yet the majority (60 percent and 61 percent, Increasing risks—from extreme weather to infectious respectively) indicated they are less than satisfied with diseases to social cohesion strains—can have 5 movement evolves, how government is addressing the issues. compounding consequences and a profound impact on mission achievement at all levels of government. governments now have In addition to those of constituents and employees, Additionally, the mounting costs of such risks— the heightened expectations of credit rating agencies including natural disasters, cyber-attacks, excess an opportunity to build make ESG a business imperative that cannot be medical care expenses, and health disparities—drive ignored. In March 2022, credit rating agency S&P greater urgency for action on ESG. on a foundation of Global Ratings (S&P) published its first ESG Credit Indicator Report Card for U.S. states and territories, Juxtaposed against these urgent needs is the reality leadership and answer a which reflects S&P’s opinion of the influence that ESG that public trust in government as an institution is 6 factors have on their credit rating analysis. broader call, with an declining in the U.S. and in many countries across the globe. According to the 2022 Edelman Trust Recent landmark federal funding programs include Barometer, the U.S. trust index—the average percent observable shift in the ESG-related investments, as well as incentives to spur trust—in governments in 2022 was just 42 points, ESG-related action by state and local governments. For 2 down 10 points since 2017. way they have typically example, the Infrastructure Investment and Jobs Act (IIJA), enacted in November 2021, includes significant Importantly, the U.S. public generally values and led on ESG issues. investments in carbon reduction, electric vehicle expects governments’ involvement and action related charging infrastructure, broadband infrastructure, and to ESG issues—and wants governments to take more supply chains for clean energy technologies. To action. In February 2022, KPMG LLP (KPMG) position for competitive grant opportunities that are conducted a survey of the U.S. public to examine part of the program, state and local governments will individuals‘ sentiments on governments‘ approach to need to demonstrate that they will be good stewards ESG. While about 7 in 10 individuals indicate that of the funding from an ESG perspective. governments should play a leading role in solving environmental and social issues, only 35% agree or Governments have the opportunity to seize this strongly agree that the governments are taking the moment to reestablish their role with respect to 3 appropriate amount of action to solve these issues. driving gains on major ESG issues. 5 2 Ibid. 1 2022 Edelman Trust Barometer Fact Sheet: President Biden Signs Executive Order Catalyzing America’s Clean 3 6 KPMG survey among U.S. residents S&P Global, ESG Credit Indicator Energy Economy Through Federal Sustainability 4 Environmental, Social, and Governance: Environmental, Social, and Governance: Government Ibid. Report Card: US States And Territories 3Government leadership as a catalyst for success leadership as a catalyst for success 4 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Generally, the public wants to see ESG imperatives in government governments take action around ESG The scope of ESG includes many issues essential to the mission of governments today—whether reducing wildfires in California, installing broadband in rural Texas, or deploying cyber-secure microgrids to help ensure of individuals believe that governments should play a energy resilience. 70% leading role in solving environmental and social issues While many ESG initiatives are intrinsic to the mission of government agencies, thinking about them as interrelated pieces under a common framework helps set goals, measure success, and ensure accountability. Of course, many Agree or strongly agree that governments are taking the ESG initiatives do not fall cleanly into either the E, the S, or the G category. Rather, they often begin with a focus in 35% appropriate amount of action to solve these issues one area and flow into adjacent areas, incorporating key elements of the other categories. Governments will each have their own mix of priority Federal and state governments are evaluated as ESG issues, but some prominent issues on primarily responsible for addressing ESG issues governments’ agendas today include: Federal government 54% 15% 10% 12% 8% State governments 48% 23% 17% 9% 4% Individuals 31% 8% 15% 16% 30% Environmental Local governments 29% 30% 18% 14% 8% • Environmental and climate risk • Water security • Waste management Corporations 23% 14% 22% 27% 14% • Greenhouse gas and carbon emissions • Energy management and resilience • Fleet electrification International 15% 10% 17% 22% 36% • Land use organizations • Air quality • Impact to ecosystems and biodiversity 1-2, Most responsible 3 4 5 6 Least responsible nance Governments' engagement with ESG issues impacts the Social Gover • Human rights • Transparency and disclosure public’s approval of governments and their representatives • DEI • Stakeholder engagement • Health equity • Systemic risk management • Working conditions • Cybersecurity say governments' engagement with ESG issues does not at • Privacy of constituent data • Ethics and integrity • Supplier diversity • Supply chain risk and governance 8% all affect their approval of governments and their representatives • Workforce experience • Military/veteran support • Quality service delivery Source: KPMG survey among U.S. residents , n=1,000 • Environmental justice Environmental, Social, and Governance: Government leadership as a catalyst for success 5 Environmental, Social, and Governance: Government leadership as a catalyst for success 6 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Generally, the public wants to see ESG imperatives in government governments take action around ESG The scope of ESG includes many issues essential to the mission of governments today—whether reducing wildfires in California, installing broadband in rural Texas, or deploying cyber-secure microgrids to help ensure of individuals believe that governments should play a energy resilience. 70% leading role in solving environmental and social issues While many ESG initiatives are intrinsic to the mission of government agencies, thinking about them as interrelated pieces under a common framework helps set goals, measure success, and ensure accountability. Of course, many Agree or strongly agree that governments are taking the ESG initiatives do not fall cleanly into either the E, the S, or the G category. Rather, they often begin with a focus in 35% appropriate amount of action to solve these issues one area and flow into adjacent areas, incorporating key elements of the other categories. Governments will each have their own mix of priority Federal and state governments are evaluated as ESG issues, but some prominent issues on primarily responsible for addressing ESG issuesgovernments’ agendas today include: Federal government54%15%10%12%8% State governments48%23%17%9% 4% Individuals31%8%15%16%30% Environmental Local governments29%30%18%14%8% • Environmental and climate risk • Water security • Waste management Corporations23%14%22%27%14% • Greenhouse gas and carbon emissions • Energy management and resilience • Fleet electrification International 15%10%17%22%36% • Land use organizations • Air quality • Impact to ecosystems and biodiversity 1-2, Most responsible3 456 Least responsible nance Governments' engagement with ESG issues impacts the Social Gover • Human rights • Transparency and disclosure public’s approval of governments and their representatives• DEI • Stakeholder engagement • Health equity • Systemic risk management • Working conditions • Cybersecurity say governments' engagement with ESG issues does not at• Privacy of constituent data • Ethics and integrity • Supplier diversity • Supply chain risk and governance 8% all affect their approval of governments and their representatives • Workforce experience • Military/veteran support • Quality service delivery Source: KPMG survey among U.S. residents , n=1,000• Environmental justice Environmental, Social, and Governance: Government leadership as a catalyst for success 5Environmental, Social, and Governance: Government leadership as a catalyst for success 6 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Urgent priorities Government agencies each have their own priority ESG areas of focus, which should be aligned with their strategic mission and reflective of constituent, employee, and other stakeholder interests. For example, Spotlight on health equity: environmental agencies may have an outsized focus on the E, while health and human services agencies may be more than a social issue more focused on strategies related to the S. On the whole, market signals identified by KPMG point to several ESG issues for governments to consider H istorically, health equity has been prioritizing to mitigate pertinent risks and create sustainable opportunities for their agency, employees, and een through the lens of the social s constituents: pillar of ESG and as the sole responsibility of health-related entities. However, health equity is dependent on a broad ecosystem of Help optimize natural capital use— Diversify energy sources—Reimagine Prioritize privacy and cybersecurity Adopt innovative approaches to natural the use of different energy sources, —Help ensure data privacy and actors across the E, S, and G capital management to increase suppliers, transportation systems, and security of critical assets. The addressing various social efficiencies and protect ecosystems. infrastructure to bolster energy protection of critical assets and data determinants of health—from The preservation of natural capital and resilience, sustainability, and security. is important not only for economic stability, education, and biodiversity is critical to the continued delivery of Decarbonization is at the forefront of many constituent security but also for maintaining national government benefits and services, including governments’ ESG strategies, including efforts to security generally. As the adage goes, you can have social and environmental context to agriculture, access to clean water, food safety, and improve energy efficiency, accelerate the shift to security without privacy, but you can’t have privacy digital access, neighborhoods and drug production. In this way, natural capital protection renewables, electrify fleets, and reduce energy without security. Privacy and cybersecurity will be built environments, and more. New is implicitly a societal and economic problem and is a consumption. To achieve future emissions targets, increasingly critical to help ensure the health and solutions lie in the adjacencies and key threat to national security. Climate action and the agencies need to understand their current emissions safety of the public. protection of natural resources cannot be thought of footprint, define a baseline for carbon emissions, and intersections between these in isolation. establish a strategy for execution. seemingly unrelated actors. Inspire a future workforce—Invest in a Improve climate resiliency—Mitigate Help ensure equitable service delivery Focusing on shifting the system healthy, diverse, and competitive —Prioritize access, equity, and mission disruption caused by heightened through modern solutions built around workforce to enhance employee experience in the delivery of climate events and realize opportunities government services. Many social attraction, retention, and engagement, to enhance infrastructure, supply chain, learning with your stakeholders, issues impact equity at the community and ultimately, advance your mission. and operational resiliency and security. designing with your communities, and This starts by demonstrating an interest Government agencies need to consider level, including healthcare services, homelessness, acting with your partners provides a in ESG and a sustained commitment to address ESG existing vulnerabilities and how to manage climate access to green space, incarceration, youth issues relevant to the agency‘s employees and risks given those vulnerabilities. Incorporating “whole investment, and pandemic recovery. Health equity, framework for action to build stakeholders. Then, develop progress reports and of life” physical infrastructure asset management into more specifically, is a critical ESG issue for compounding momentum until a point communications to chart progress toward those goals. long-term planning, investing in resilient infrastructure, governments to address, as access to quality of breakthrough, and beyond. Also, evaluate employee sentiment around adopting an equity lens and leveraging advanced healthcare is impacted by social determinants of compensation and rewards, career pathing, and analytics to improve emergency preparedness, and health and heightened climate events. mentorship programs. implementing operational resiliency and continuity of operations plans are just some ways governments are improving climate resiliency. Environmental, Social, and Governance: Government leadership as a catalyst for success 7 Environmental, Social, and Governance: Government leadership as a catalyst for success 8 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Urgent priorities Government agencies each have their own priority ESG areas of focus, which should be aligned with their strategic mission and reflective of constituent, employee, and other stakeholder interests. For example, Spotlight on health equity: environmental agencies may have an outsized focus on the E, while health and human services agencies may be more than a social issue more focused on strategies related to the S. On the whole, market signals identified by KPMG point to several ESG issues for governments to consider H istorically, health equity has been prioritizing to mitigate pertinent risks and create sustainable opportunities for their agency, employees, and een through the lens of the social s constituents: pillar of ESG and as the sole responsibility of health-related entities. However, health equity is dependent on a broad ecosystem of Help optimize natural capital use— Diversify energy sources—Reimagine Prioritize privacy and cybersecurity Adopt innovative approaches to natural the use of different energy sources, —Help ensure data privacy and actors across the E, S, and G capital management to increase suppliers, transportation systems, and security of critical assets. The addressing various social efficiencies and protect ecosystems. infrastructure to bolster energy protection of critical assets and data determinants of health—from The preservation of natural capital and resilience, sustainability, and security. is important not only for economic stability, education, and biodiversity is critical to the continued delivery of Decarbonization is at the forefront of many constituent security but also for maintaining national government benefits and services, including governments’ ESG strategies, including efforts to security generally. As the adage goes, you can have social and environmental context to agriculture, access to clean water, food safety, and improve energy efficiency, accelerate the shift to security without privacy, but you can’t have privacy digital access, neighborhoods and drug production. In this way, natural capital protection renewables, electrify fleets, and reduce energy without security. Privacy and cybersecurity will be built environments, and more. New is implicitly a societal and economic problem and is a consumption. To achieve future emissions targets, increasingly critical to help ensure the health and solutions lie in the adjacencies and key threat to national security. Climate action and the agencies need to understand their current emissions safety of the public. protection of natural resources cannot be thought of footprint, define a baseline for carbon emissions, and intersections between these in isolation. establish a strategy for execution. seemingly unrelated actors. Inspire a future workforce—Invest in a Improve climate resiliency—Mitigate Help ensure equitable service delivery Focusing on shifting the system healthy, diverse, and competitive —Prioritize access, equity, and mission disruption caused by heightened through modern solutions built around workforce to enhance employee experience in the delivery of climate events and realize opportunities government services. Many social attraction, retention, and engagement, to enhance infrastructure, supply chain, learning with your stakeholders, issues impact equity at the community and ultimately, advance your mission. and operational resiliency and security. designing with your communities, and This starts by demonstrating an interest Government agencies need to consider level, including healthcare services, homelessness, acting with your partners provides a in ESG and a sustained commitment to address ESG existing vulnerabilities and how to manage climate access to green space, incarceration, youth issues relevant to the agency‘s employees and risks given those vulnerabilities. Incorporating “whole investment, and pandemic recovery. Health equity, framework for action to build stakeholders. Then, develop progress reports and of life” physical infrastructure asset management into more specifically, is a critical ESG issue for compounding momentum until a point communications to chart progress toward those goals. long-term planning, investing in resilient infrastructure, governments to address, as access to quality of breakthrough, and beyond. Also, evaluate employee sentiment around adopting an equity lens and leveraging advanced healthcare is impacted by social determinants of compensation and rewards, career pathing, and analytics to improve emergency preparedness, and health and heightened climate events. mentorship programs. implementing operational resiliency and continuity of operations plans are just some ways governments are improving climate resiliency. Environmental, Social, and Governance: Government leadership as a catalyst for success 7 Environmental, Social, and Governance: Government leadership as a catalyst for success 8 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Government as a policy maker electrifying their fleet vehicles, and enhancing privacy and cybersecurity, among many other operational Policy making is a central role of governments, strategies that may directly or indirectly advance ESG creating guiding principles and courses of action for objectives. governments. Governments are now enacting policies that advance action on ESG-related issues, including Governments are among the largest owners and Four roles of governments in establishing ESG commitments and targets, creating operators of infrastructure assets—from military task forces and interagency working groups to bases, roads, bridges, ports, and transit systems to examine and address ESG issues, and other policy energy, public health, and education infrastructure, and addressing ESG issues efforts. more. As approximately 70 percent of global greenhouse gas emissions come from infrastructure construction and For example, among many other federal sustainability operations, governments will likely consider incorporating In their work to address ESG issues, governments have four distinct roles. While targets, the U.S. government rejoined the Paris a focus on ESG and resilience into capital planning and 13 governments’ work on ESG issues as a regulator and policy maker is perhaps the most Agreement in 2021 and set a Nationally Determined investing in resilient infrastructure. Investment in well known, governments at all levels are making significant changes to their roles as Contribution to achieve a 50 percent to 52 percent resilient infrastructure also plays a critical role in an operator and employer in light of ESG priorities. reduction from 2005 levels in economy-wide net mitigating the impacts of natural disasters on 10 greenhouse gas pollution in 2030. At the state level, communities and will likely be considered with an equity 24 states and the District of Columbia have lens to protect vulnerable communities susceptible to established economy-wide greenhouse gas emissions disproportionate impacts in their social, built, economic, 11 targets. and natural environments. Government as a regulator The federal government is also pursuing policies Governments procure products that are vital to defense, focused on advancing equity for all, calling on federal national security, health, equity, and the economy, agencies to identify and address barriers to equal including weaponry, pharmaceuticals, medical supplies, legislation mandating divestment of public assets from opportunity that underserved communities may face rare earth elements, semiconductors, and many other 12 fossil fuels, requiring the state, including its $17 billion Governments drive action on ESG through regulatory due to government policies and programs. State and products. Supply chains for such products have change. Governments have long enacted and upheld pension fund and state treasury, to divest itself of local governments are also making policy decisions to experienced significant disruptions from the pandemic, regulations addressing issues across the E, S, and G, assets invested in the fossil fuel industry by January 1, prioritize equity in their jurisdictions, including port crises, severe weather events, and supply and labor 8 including different antipollution, resource-use, 2026. commitments to recruit and retain a diverse shortages—all highlighting the vital importance of antidiscrimination, privacy, and labor regulations, government workforce that is reflective of the governments investing in building supply chain resilience, States are also beginning to consider legislation to among others. demographics of the jurisdiction. sustainability, diversity, and security. In addition, create more climate transparency and accountability governments are continuing to examine their Public awareness, social pressures, investor demands, from major corporations. For example, the California Critically, governments’ policies related to ESG issues procurement practices and contractor and supplier Climate Corporate Accountability Act, being and the priorities and directives of government officials spur government action and help ensure that ESG- programs to advance related ESG goals. and legislative bodies are expanding regulatory considered by the California Assembly as of June related issues are key considerations in government boundaries as they relate to addressing ESG as a 2022, would be a first-of-its-kind legislation to require operations planning and decision-making. Respondents tell KPMG that governments are falling annual reporting of greenhouse gas emissions by both whole. In March 2022, for example, the Securities and Governments lead by example by setting and short of expectations in addressing many of these Exchange Commission released proposed rules, The public and private companies doing business in implementing policy on ESG. ESG issues. In the area of disaster response and Enhancement and Standardization of Climate-Related California and generating over $1 billion in gross annual resilience, for example, 56 percent of survey 9 Disclosures for Investors, that would require revenue. respondents are less than satisfied with how the registrants to provide certain climate-related government is addressing this issue. Some 60 information, including disclosure of greenhouse gas ESG-related proposals and regulations continue to Government as an operator percent of respondents are not satisfied with their 14 emissions, in their registration statements and annual generate strong responses from state and local experience of receiving government services. reports. The proposed rules are expansive and governments. For example, in many states, lawmakers are introducing legislation and practices which push intended to provide more consistent, comparable, and With significant footprints, governments have the back on financial institutions that are divesting from decision-useful information so that investors can better Governments maintain operations, manage supply opportunity to improve the design and delivery of evaluate the impact of climate-related matters on a fossil fuels. The Russia-Ukraine war and the recent chains, and provide government services that services and make operational and supply chain decisions 7 registrant. rising cost of fuel prices in the U.S. has illuminated inherently have a broad impact on ESG issues. Just as that have a significant impact on advancing ESG goals, tension between short-term energy needs and any entity, governments at all levels generally use while carrying out their mission. At the state and local level, a number of states and long-term plans for energy transition, influencing energy, water, vehicles, transportation systems, real 10 cities have taken steps to implement ESG regulatory regulatory decisions and timing. While it is unclear estate, and suppliers that impact, and are impacted by, Fact Sheet: President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean how the priorities will be balanced against the growing frameworks for their pension systems. For example, in the environment in which they operate. Many Energy Technologies 11 Center for Climate and Energy Solutions, U.S. State Greenhouse Gas Emissions Targets June 2021, Maine became the first state to pass ESG movement, it is clear that the pace of ESG governments, spurred in part by the impact of the 12 Executive Order 13985: Advancing Racial Equity and Support for Underserved regulations is unlikely to slow. COVID-19 pandemic, are implementing hybrid work Communities Through the Federal Government 13 The World Bank (2018). Low-Carbon Infrastructure Private Participation in Infrastructure policies and reducing their real estate footprints, (PPI) 2002 to H1 2017 7 14 SEC, The Enhancement and Standardization of Climate-Related Disclosures for Investors (2022), Release Nos. 33-11042; 34-94478 KPMG surveys among U.S. federal, state, and city government employees 8 ME LD99 (HP 65), An Act To Require the State To Divest Itself of Assets Invested in the Fossil Fuel Industry 9 CA SB-260 Climate Corporate Accountability Act 9 Environmental, Social, and Governance: Government leadership as a catalyst for success Environmental, Social, and Governance: Government leadership as a catalyst for success 1010 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Government as a policy maker electrifying their fleet vehicles, and enhancing privacy and cybersecurity, among many other operational Policy making is a central role of governments, strategies that may directly or indirectly advance ESG creating guiding principles and courses of action for objectives. governments. Governments are now enacting policies that advance action on ESG-related issues, including Governments are among the largest owners and Four roles of governments in establishing ESG commitments and targets, creating operators of infrastructure assets—from military task forces and interagency working groups to bases, roads, bridges, ports, and transit systems to examine and address ESG issues, and other policy energy, public health, and education infrastructure, and addressing ESG issuesefforts. more. As approximately 70 percent of global greenhouse gas emissions come from infrastructure construction and For example, among many other federal sustainability operations, governments will likely consider incorporating In their work to address ESG issues, governments have four distinct roles. While targets, the U.S. government rejoined the Paris a focus on ESG and resilience into capital planning and 13 governments’ work on ESG issues as a regulator and policy maker is perhaps the most Agreement in 2021 and set a Nationally Determined investing in resilient infrastructure. Investment in well known, governments at all levels are making significant changes to their roles as Contribution to achieve a 50 percent to 52 percent resilient infrastructure also plays a critical role in an operator and employer in light of ESG priorities.reduction from 2005 levels in economy-wide net mitigating the impacts of natural disasters on 10 greenhouse gas pollution in 2030. At the state level, communities and will likely be considered with an equity 24 states and the District of Columbia have lens to protect vulnerable communities susceptible to established economy-wide greenhouse gas emissions disproportionate impacts in their social, built, economic, 11 targets. and natural environments. Government as a regulator The federal government is also pursuing policies Governments procure products that are vital to defense, focused on advancing equity for all, calling on federal national security, health, equity, and the economy, agencies to identify and address barriers to equal including weaponry, pharmaceuticals, medical supplies, legislation mandating divestment of public assets from opportunity that underserved communities may face rare earth elements, semiconductors, and many other 12 fossil fuels, requiring the state, including its $17 billion Governments drive action on ESG through regulatory due to government policies and programs. State and products. Supply chains for such products have change. Governments have long enacted and upheld pension fund and state treasury, to divest itself of local governments are also making policy decisions to experienced significant disruptions from the pandemic, regulations addressing issues across the E, S, and G, assets invested in the fossil fuel industry by January 1, prioritize equity in their jurisdictions, including port crises, severe weather events, and supply and labor 8 including different antipollution, resource-use, 2026. commitments to recruit and retain a diverse shortages—all highlighting the vital importance of antidiscrimination, privacy, and labor regulations, government workforce that is reflective of the governments investing in building supply chain resilience, States are also beginning to consider legislation to among others. demographics of the jurisdiction. sustainability, diversity, and security. In addition, create more climate transparency and accountability governments are continuing to examine their Public awareness, social pressures, investor demands, from major corporations. For example, the California Critically, governments’ policies related to ESG issues procurement practices and contractor and supplier Climate Corporate Accountability Act, being and the priorities and directives of government officials spur government action and help ensure that ESG- programs to advance related ESG goals. and legislative bodies are expanding regulatory considered by the California Assembly as of June related issues are key considerations in government boundaries as they relate to addressing ESG as a 2022, would be a first-of-its-kind legislation to require operations planning and decision-making. Respondents tell KPMG that governments are falling annual reporting of greenhouse gas emissions by both whole. In March 2022, for example, the Securities and Governments lead by example by setting and short of expectations in addressing many of these Exchange Commission released proposed rules, The public and private companies doing business in implementing policy on ESG. ESG issues. In the area of disaster response and Enhancement and Standardization of Climate-Related California and generating over $1 billion in gross annual resilience, for example, 56 percent of survey 9 Disclosures for Investors, that would require revenue. respondents are less than satisfied with how the registrants to provide certain climate-related government is addressing this issue. Some 60 information, including disclosure of greenhouse gas ESG-related proposals and regulations continue to Government as an operator percent of respondents are not satisfied with their 14 emissions, in their registration statements and annual generate strong responses from state and local experience of receiving government services. reports. The proposed rules are expansive and governments. For example, in many states, lawmakers are introducing legislation and practices which push intended to provide more consistent, comparable, and With significant footprints, governments have the back on financial institutions that are divesting from decision-useful information so that investors can better Governments maintain operations, manage supply opportunity to improve the design and delivery of evaluate the impact of climate-related matters on a fossil fuels. The Russia-Ukraine war and the recent chains, and provide government services that services and make operational and supply chain decisions 7 registrant.rising cost of fuel prices in the U.S. has illuminated inherently have a broad impact on ESG issues. Just as that have a significant impact on advancing ESG goals, tension between short-term energy needs and any entity, governments at all levels generally use while carrying out their mission. At the state and local level, a number of states and long-term plans for energy transition, influencing energy, water, vehicles, transportation systems, real 10 cities have taken steps to implement ESG regulatory regulatory decisions and timing. While it is unclear estate, and suppliers that impact, and are impacted by, Fact Sheet: President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean how the priorities will be balanced against the growing frameworks for their pension systems. For example, in the environment in which they operate. Many Energy Technologies 11 Center for Climate and Energy Solutions, U.S. State Greenhouse Gas Emissions Targets June 2021, Maine became the first state to pass ESG movement, it is clear that the pace of ESG governments, spurred in part by the impact of the 12 Executive Order 13985: Advancing Racial Equity and Support for Underserved regulations is unlikely to slow. COVID-19 pandemic, are implementing hybrid work Communities Through the Federal Government 13 The World Bank (2018). Low-Carbon Infrastructure Private Participation in Infrastructure policies and reducing their real estate footprints, (PPI) 2002 to H1 2017 7 14 SEC, The Enhancement and Standardization of Climate-Related Disclosures for Investors (2022), Release Nos. 33-11042; 34-94478 KPMG surveys among U.S. federal, state, and city government employees 8 ME LD99 (HP 65), An Act To Require the State To Divest Itself of Assets Invested in the Fossil Fuel Industry 9 CA SB-260 Climate Corporate Accountability Act 9Environmental, Social, and Governance: Government leadership as a catalyst for successEnvironmental, Social, and Governance: Government leadership as a catalyst for success 1010 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Government as an employer Data privacy and security is the most important ESG issue for federal employee survey respondents (88 Government is the largest U.S. employer, so its percent), followed closely by infrastructure 15 human capital footprint is vast. Protecting the health modernization (76 percent). State and city employees and well-being of government employees and report infrastructure modernization as the top issue improving DEI in the government workforce not only (86 percent), followed by data privacy and security (83 benefits employees, but also creates a better 19 percent). opportunity for employees to advance their agency’s mission and ultimately, create positive change that Our research shows that environmental and social impacts constituents. issues are important to employees, but ESG as a term is new to government, and most employees are not Some 60 percent of government executives say their 20 familiar with the term. Of those who are, they have agencies struggle to attract, engage, and retain heard about ESG mostly from the news, indicating a younger, digitally skilled talent while managing an need for continued education and engagement on the 16 aging workforce. Governments have the opportunity 21 topic. Generally, federal government leadership is to lean into a commitment and action around ESG more familiar with ESG issues than their employees, issues that employees care about to inspire purpose signaling an opportunity for leadership to provide and attract, retain, and engage talent. clarity and increase communication about the value of ESG throughout the agency. The majority of federal, state, and city government employees indicate they are satisfied with their To embed ESG into the workforce, governments 17 employers’ DEI efforts. However, government need to demonstrate a commitment to ESG both employees, like the general public, want to see internally and externally, consider how to inspire broader impact and change around ESG from purpose and mission in employees, and continue to governments. Both federal (63 percent) and state and modernize to better enable employees do their jobs. city (68 percent) government employee respondents In addition, governments should focus on increasing say governments are not taking the appropriate ESG fluency among employees, as well as attracting amount of action to address environmental issues, and and upskilling employees with ESG skillsets needed more than 59 percent and 73 percent, respectively, now and for the future. 18 say the same about addressing social issues. The majority of federal, state, and city go vernment employee respondents say government is not taking the appropriate amount of action to address ESG issues. Respondents who disagree or strongly disagree that government is taking the appropriate amount of action to address: Environmental issues Social issues Federal government 63% 68% employees State and city government employees 59% 73% Source: KPMGsurvey among U.S federal, state, and city HPWFSO N FO U employees, n=427 18 15 21 U.S. Office of Personnel Management website Ibid. Ibid. 19 16 KPMG Modern Government survey, 2021 Ibid. 20 17 KPMG survey among U.S federal, state, and city government employees Ibid. Environmental, Social, and Governance: Government leadership as a catalyst for success Environmental, Social, and Governance: Government leadership as a catalyst for success 12 11 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Government as an employer Data privacy and security is the most important ESG issue for federal employee survey respondents (88 Government is the largest U.S. employer, so its percent), followed closely by infrastructure 15 human capital footprint is vast. Protecting the health modernization (76 percent). State and city employees and well-being of government employees and report infrastructure modernization as the top issue improving DEI in the government workforce not only (86 percent), followed by data privacy and security (83 benefits employees, but also creates a better 19 percent). opportunity for employees to advance their agency’s mission and ultimately, create positive change that Our research shows that environmental and social impacts constituents. issues are important to employees, but ESG as a term is new to government, and most employees are not Some 60 percent of government executives say their 20 familiar with the term.Of those who are, they have agencies struggle to attract, engage, and retain heard about ESG mostly from the news, indicating a younger, digitally skilled talent while managing an need for continued education and engagement on the 16 aging workforce. Governments have the opportunity 21 topic. Generally, federal government leadership is to lean into a commitment and action around ESG more familiar with ESG issues than their employees, issues that employees care about to inspire purpose signaling an opportunity for leadership to provide and attract, retain, and engage talent. clarity and increase communication about the value of ESG throughout the agency. The majority of federal, state, and city government employees indicate they are satisfied with their To embed ESG into the workforce, governments 17 employers’ DEI efforts. However, government need to demonstrate a commitment to ESG both employees, like the general public, want to see internally and externally, consider how to inspire broader impact and change around ESG from purpose and mission in employees, and continue to governments. Both federal (63 percent) and state and modernize to better enable employees do their jobs. city (68 percent) government employee respondents In addition, governments should focus on increasing say governments are not taking the appropriate ESG fluency among employees, as well as attracting amount of action to address environmental issues, and and upskilling employees with ESG skillsets needed more than 59 percent and 73 percent, respectively, now and for the future. 18 say the same about addressing social issues. The majority of federal, state, and city go vernment employee respondents say government is not taking the appropriate amount of action to address ESG issues. Respondents who disagree or strongly disagree that government is taking the appropriate amount of action to address: Environmental issuesSocial issues Federal government 63%68% employees State and city government employees59%73% Source: KPMGsurvey among U.S federal, state, and city HPWFSO N FO U employees, n=427 18 15 21 U.S. Office of Personnel Management websiteIbid. Ibid. 19 16 KPMG Modern Government survey, 2021 Ibid. 20 17 KPMG survey among U.S federal, state, and city government employees Ibid. Environmental, Social, and Governance: Government leadership as a catalyst for successEnvironmental, Social, and Governance: Government leadership as a catalyst for success 12 11 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Key considerations Broadening governments' mission to encompass ESG — How are we managing the current ESG risk priorities begs the question of where to start. It’s critical environment and where are the gaps? to transform ESG from a siloed issue, with its parts individually managed in distinct corners of governments, — What opportunities does our agency have for into a core competency that’s systematically embedded potential innovation posed by ESG demands? in governments’ strategic mission. The senior-most levels of the agency must take a leadership role, establishing ESG targets—that are informed by and 03Analyze stakeholder impact reflective of constituent, employee, and other stakeholder interests—to set the “tone at the top” and — What will our stakeholders value most now and in drive sustainable change throughout the agency. the future? Achieving this integration can be complex. Every — What are our constituents, employees, and other government agency must understand and shape the total stakeholders saying about ESG topics? impact of its strategy and operations externally—on the environment, constituents, the communities in which it — How does our approach to ESG topics influence operates, and on other stakeholders—and internally, on the broader stakeholder ecosystem? its employees and performance. — How can we set clear responsibilities for ESG However, the core questions to ask when adopting initiatives across all levels of our agency? an ESG lens are the same regardless of an agency‘s ESG priorities, as the following framework shows: — How can our agency shape our ESG message to From pain to purpose stakeholders in the context of our strategic mission? Gain agreement on what ESG means for Governments face a number of pain points when 01 your agency Embed ESG into your 04agency‘s strategic mission addressing ESG issues. — How will this focus on ESG help optimize the — What might be required of our agency or suppliers achievement of our mission, organizational in the future from a regulatory standpoint? resilience, long-term performance, etc.? — How can we incorporate ESG objectives into — Which material ESG topics intersect with our strategic planning and budgeting? agency‘s mission? The complexity of government structures and systems a lack of ESG-specific talent and few clear roles and makes speed to action challenging. ESG initiatives responsibilities around ESG, also complicate plans and — Does our agency have the right people, — Does leadership have a common understanding of need to outlive heated debates of the moment efforts. experience, and structure to oversee ESG in the what ESG means in practical terms to our agency? because some take many years before showing At the same time, governments are challenged to act context of our strategic mission? progress. Governments must work harder to achieve a quickly by a heightened risk of inaction, a slew of new — What is our current understanding of the impact of unified direction on ESG, face budgetary constraints executive orders they must abide by, and external — What processes or policies do we need to our agency on the environment and social issues? and financial risks related to ESG issues, and are pressures that create new ESG demands. They also establish to integrate and operationalize an ESG limited by legacy technology and systems to collect must consider employee sentiment and demonstrate a strategy in our agency? What more should we do and secure data, which slows progress. Assess risks and opportunities commitment to ESG as an employer. 02 to educate our people on the effects and benefits of ESG and build their skills? Additionally, competing efforts within governments — How do we identify and quantify ESG-related risks make it difficult to prioritize ESG issues, especially — How can we measure the progress and impact of and opportunities to our physical, digital, and when they need to be weighed against each other. our ESG initiatives? human capital assets? What is the time horizon Decarbonization tactics, for example, also need to and severity of impact? consider impacts to the natural environment and biodiversity. Finally, human capital challenges, such as — How resilient is our agency to mission disruption? What is the impact on constituents? 13 Environmental, Social, and Governance: Government leadership as a catalyst for success Environmental, Social, and Governance: Government leadership as a catalyst for success 14 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Key considerations Broadening governments' mission to encompass ESG — How are we managing the current ESG risk priorities begs the question of where to start. It’s critical environment and where are the gaps? to transform ESG from a siloed issue, with its parts individually managed in distinct corners of governments, — What opportunities does our agency have for into a core competency that’s systematically embedded potential innovation posed by ESG demands? in governments’ strategic mission. The senior-most levels of the agency must take a leadership role, establishing ESG targets—that are informed by and 03Analyze stakeholder impact reflective of constituent, employee, and other stakeholder interests—to set the “tone at the top” and — What will our stakeholders value most now and in drive sustainable change throughout the agency. the future? Achieving this integration can be complex. Every — What are our constituents, employees, and other government agency must understand and shape the total stakeholders saying about ESG topics? impact of its strategy and operations externally—on the environment, constituents, the communities in which it — How does our approach to ESG topics influence operates, and on other stakeholders—and internally, on the broader stakeholder ecosystem? its employees and performance. — How can we set clear responsibilities for ESG However, the core questions to ask when adopting initiatives across all levels of our agency? an ESG lens are the same regardless of an agency‘s ESG priorities, as the following framework shows: — How can our agency shape our ESG message to From pain to purpose stakeholders in the context of our strategic mission? Gain agreement on what ESG means for Governments face a number of pain points when 01 your agency Embed ESG into your 04agency‘s strategic mission addressing ESG issues. — How will this focus on ESG help optimize the — What might be required of our agency or suppliers achievement of our mission, organizational in the future from a regulatory standpoint? resilience, long-term performance, etc.? — How can we incorporate ESG objectives into — Which material ESG topics intersect with our strategic planning and budgeting? agency‘s mission? The complexity of government structures and systems a lack of ESG-specific talent and few clear roles and makes speed to action challenging. ESG initiatives responsibilities around ESG, also complicate plans and — Does our agency have the right people, — Does leadership have a common understanding of need to outlive heated debates of the moment efforts. experience, and structure to oversee ESG in the what ESG means in practical terms to our agency? because some take many years before showing At the same time, governments are challenged to act context of our strategic mission? progress. Governments must work harder to achieve a quickly by a heightened risk of inaction, a slew of new — What is our current understanding of the impact of unified direction on ESG, face budgetary constraints executive orders they must abide by, and external — What processes or policies do we need to our agency on the environment and social issues? and financial risks related to ESG issues, and are pressures that create new ESG demands. They also establish to integrate and operationalize an ESG limited by legacy technology and systems to collect must consider employee sentiment and demonstrate a strategy in our agency? What more should we do and secure data, which slows progress. Assess risks and opportunities commitment to ESG as an employer. 02to educate our people on the effects and benefits of ESG and build their skills? Additionally, competing efforts within governments — How do we identify and quantify ESG-related risks make it difficult to prioritize ESG issues, especially — How can we measure the progress and impact of and opportunities to our physical, digital, and when they need to be weighed against each other. our ESG initiatives? human capital assets? What is the time horizon Decarbonization tactics, for example, also need to and severity of impact? consider impacts to the natural environment and biodiversity. Finally, human capital challenges, such as — How resilient is our agency to mission disruption? What is the impact on constituents? 13 Environmental, Social, and Governance: Government leadership as a catalyst for successEnvironmental, Social, and Governance: Government leadership as a catalyst for success 14 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Shifting the mindset, reaping the benefits We have a unique opportunity to improve our defense capabilities and become a more efficient force, while securing a better future. I challenge our Army to examine climate threats, prioritize resources, and take swift action. Christine E. Wormuth Secretary of the Army Department of the Army, Office of the Assistant Secretary of the Army for Installations, Energy and Environment. February 2022. United States Army Climate Strategy. Washington, DC Governments need to begin looking at their mission, • Economic and cost efficiency opportunities strategy, and operations through an ESG lens to better through sustainable sourcing, process efficiencies, understand their relevant risks, vulnerabilities, and energy efficiency and renewable energy sourcing, opportunities. In our work, we see governments doing talent attraction and retention, and other financial arrangements related to ESG. ESG also can just that to achieve greater organizational stability, contribute to creating jobs and attracting businesses, better risk management, and increased resiliency— driving economic and regional development particularly in infrastructure-intensive and defense agencies. • Increased strategic alignment by integrating ESG goals with the agency‘s mission, including ongoing In shifting its mindset to leading by example on ESG in A mindset shift in government—one in which review of requirements, metrics, and targets all its roles, government can harness the power of ESG to move toward a Modern Government, one that governments realize and embrace their leadership in ESG • Improved public trust and confidence by taking is connected, powered, and trusted. ESG agendas can disciplined action around issues critical to the public‘s help attract the next-generation workforce connected across their many roles—can serve as a catalyst for the well-being and from the ability to withstand increased to purpose and mission, accelerate governments' scrutiny from major stakeholders and outside groups efforts to modernize across stakeholder groups, drive success of the overall ESG movement and governments’ innovation, and improve public trust in governments. • Stronger organizational resilience from improved own modernization and transformation efforts. skills and alignment central to ESG that help agencies In particular, these five benefits stand out among adapt to an increasingly uncertain future. others when governments embed ESG in their Governments must lead by example and take advantage missions and operations: of a burning platform to “do well by doing good.” • Enhanced operations by incorporating business transformation, redesigned business systems, improved data transparency, or new assets that can help mitigate ESG risks and support the agency’s mission 15 Environmental, Social, and Governance: Government leadership as a catalyst for success Environmental, Social, and Governance: Government leadership as a catalyst for success 16 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Shifting the mindset, reaping the benefits We have a unique opportunity to improve our defense capabilities and become a more efficient force, while securing a better future. I challenge our Army to examine climate threats, prioritize resources, and take swift action. Christine E. Wormuth Secretary of the Army Department of the Army, Office of the Assistant Secretary of the Army for Installations, Energy and Environment. February 2022. United States Army Climate Strategy. Washington, DC Governments need to begin looking at their mission, • Economic and cost efficiency opportunities strategy, and operations through an ESG lens to better through sustainable sourcing, process efficiencies, understand their relevant risks, vulnerabilities, and energy efficiency and renewable energy sourcing, opportunities. In our work, we see governments doing talent attraction and retention, and other financial arrangements related to ESG. ESG also can just that to achieve greater organizational stability, contribute to creating jobs and attracting businesses, better risk management, and increased resiliency— driving economic and regional development particularly in infrastructure-intensive and defense agencies. • Increased strategic alignment by integrating ESG goals with the agency‘s mission, including ongoing In shifting its mindset to leading by example on ESG in A mindset shift in government—one in which review of requirements, metrics, and targets all its roles, government can harness the power of ESG to move toward a Modern Government, one that governments realize and embrace their leadership in ESG • Improved public trust and confidence by taking is connected, powered, and trusted. ESG agendas can disciplined action around issues critical to the public‘s help attract the next-generation workforce connected across their many roles—can serve as a catalyst for the well-being and from the ability to withstand increased to purpose and mission, accelerate governments' scrutiny from major stakeholders and outside groups efforts to modernize across stakeholder groups, drive success of the overall ESG movement and governments’ innovation, and improve public trust in governments. • Stronger organizational resilience from improvedown modernization and transformation efforts. skills and alignment central to ESG that help agencies In particular, these five benefits stand out among adapt to an increasingly uncertain future. others when governments embed ESG in their Governments must lead by example and take advantage missions and operations:of a burning platform to “do well by doing good.” • Enhanced operations by incorporating business transformation, redesigned business systems, improved data transparency, or new assets that can help mitigate ESG risks and support the agency’s mission 15 Environmental, Social, and Governance: Government leadership as a catalyst for successEnvironmental, Social, and Governance: Government leadership as a catalyst for success 16 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Governments Morehouse School of Medicine Morehouse School of Medicine (Morehouse) won a grant from the U.S. Department of Health and Human in action Services, Office of Minority Health, to address COVID-19 in racial and ethnic minority, rural, and Federal, state, and local government agencies that socially vulnerable communities. Morehouse took into place a strategic focus on ESG can produce tangible account infrastructure and regulatory requirements impacts on operations, finances, and organizational along with the additional complexities of a siloed resilience. workforce; the complex health needs of the communities characterized by mental health Here are a few examples: challenges, co-morbidities, and other social determinants of health (SDOH); disparities in SDOH U.S. Army and healthcare access that pose unique challenges to disseminating an effective mitigation strategy; and The U.S. Army broke new ground in February 2022 linguistic barriers that often alienate under-served when it released its first-ever Army Climate Strategy populations. (ACS). The strategy is designed to help counter the threat climate change poses to the Army’s ability to Morehouse developed a platform that gathers critical provide trained and ready forces in response to national resources and data on COVID-19 to connect families to security threats around the world. The ACS includes culturally and linguistically appropriate information and aggressive goals to reduce Army net greenhouse gas services. The platform enables communication and Now is the time pollution, attain net-zero Army greenhouse gas information dissemination, linking the country’s most emissions, and electrify all non-combat vehicles, among vulnerable populations to the right care at the right other objectives. time. In aiming to decrease overall infection and death Now is the time for governments to transform their rates, Morehouse demonstrates the major return on The ACS aims not only to secure a sustainable, cleaner mindsets—to consider ESG holistically as central to investment that can be achieved by addressing health tomorrow but also to save soldiers’ lives. In combat, for their missions rather than as siloed issues managed in inequity and access. example, the supply lines that provide fuel for forward distinct areas. operating bases, Humvees, and other fighting vehicles are major targets for attack. Taking fossil fuels out of City of Los Angeles Now is the time for governments to take action—to the equation—or even just improving the fuel efficiency make ESG investments in a coordinated manner so of tanks and other heavy vehicles—can potentially help that positive outcomes can be greater than the sum of Aiming to “lead the automotive revolution of the mitigate that threat. their parts over time, and consistently so. future,” the City of Los Angeles approved an “Electric New York Power Authority Vehicle Master Plan” in April 2022. The plan outlines Now is the time for governments to lead by example. an entirely electric fleet of more than 10,000 City- With a mission to make the world better, the purpose owned vehicles and deployment of an electric vehicle New York Power Authority (NYPA) is embedding ESG of government at all levels—federal, state, and local— (EV) charging infrastructure across the City. The as a foundational pillar of its 10-year strategic plan. The squarely intersects with the purpose of ESG: to make initiative is part of its effort to be one of the first U.S. plan addresses 15 material ESG areas, from a world that sets the standard for better living and cities to rely on carbon-free energy by 2035. decarbonization and energy reliability, to affordability better working, running more efficiently and cost and accessibility, employee health and safety, the effectively, for the betterment of all. The City is focused on equitable placement of EV environmental and social impacts of its supply chain, infrastructure across Los Angeles, leveraging state and and enterprise risk and resilience. Central to its strategy Now is the time to help deliver on the promise of a federal funding—including historic investments in the is the reporting and disclosure of comprehensive data Modern Government—one that is connected, EV sector in the 2021 Infrastructure Investment and related to the implementation of ESG goals. NYPA aims powered, and trusted, creating positive change that Jobs Act—for the mass adoption of EVs. to become among the first U.S. utilities and benefits government workers, constituents, and government entities to issue an integrated report for the communities. 2022 reporting cycle. Sources: Department of the Army, Office of the Assistant Secretary of the Army for Installations, Energy and Environment. February 2022. United States Army Climate Strategy. Washington, DC. New York Power Authority 2021-2025 Sustainability Plan Morehouse School of Medicine National COVID-19 Resiliency Network website City of Los Angeles Electric Vehicle Master Plan Environmental, Social, and Governance: 17 Environmental, Social, and Governance: Government leadership as a catalyst for success Government leadership as a catalyst for success 18 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Governments Morehouse School of Medicine Morehouse School of Medicine (Morehouse) won a grant from the U.S. Department of Health and Human in actionServices, Office of Minority Health, to address COVID-19 in racial and ethnic minority, rural, and Federal, state, and local government agencies that socially vulnerable communities. Morehouse took into place a strategic focus on ESG can produce tangible account infrastructure and regulatory requirements impacts on operations, finances, and organizational along with the additional complexities of a siloed resilience. workforce; the complex health needs of the communities characterized by mental health Here are a few examples: challenges, co-morbidities, and other social determinants of health (SDOH); disparities in SDOH U.S. Army and healthcare access that pose unique challenges to disseminating an effective mitigation strategy; and The U.S. Army broke new ground in February 2022 linguistic barriers that often alienate under-served when it released its first-ever Army Climate Strategy populations. (ACS). The strategy is designed to help counter the threat climate change poses to the Army’s ability to Morehouse developed a platform that gathers critical provide trained and ready forces in response to national resources and data on COVID-19 to connect families to security threats around the world. The ACS includes culturally and linguistically appropriate information and aggressive goals to reduce Army net greenhouse gas services. The platform enables communication and Now is the time pollution, attain net-zero Army greenhouse gas information dissemination, linking the country’s most emissions, and electrify all non-combat vehicles, among vulnerable populations to the right care at the right other objectives. time. In aiming to decrease overall infection and death Now is the time for governments to transform their rates, Morehouse demonstrates the major return on The ACS aims not only to secure a sustainable, cleaner mindsets—to consider ESG holistically as central to investment that can be achieved by addressing health tomorrow but also to save soldiers’ lives. In combat, for their missions rather than as siloed issues managed in inequity and access. example, the supply lines that provide fuel for forward distinct areas. operating bases, Humvees, and other fighting vehicles are major targets for attack. Taking fossil fuels out of City of Los Angeles Now is the time for governments to take action—to the equation—or even just improving the fuel efficiency make ESG investments in a coordinated manner so of tanks and other heavy vehicles—can potentially help that positive outcomes can be greater than the sum of Aiming to “lead the automotive revolution of the mitigate that threat. their parts over time, and consistently so. future,” the City of Los Angeles approved an “Electric New York Power Authority Vehicle Master Plan” in April 2022. The plan outlines Now is the time for governments to lead by example. an entirely electric fleet of more than 10,000 City- With a mission to make the world better, the purpose owned vehicles and deployment of an electric vehicle New York Power Authority (NYPA) is embedding ESG of government at all levels—federal, state, and local— (EV) charging infrastructure across the City. The as a foundational pillar of its 10-year strategic plan. The squarely intersects with the purpose of ESG: to make initiative is part of its effort to be one of the first U.S. plan addresses 15 material ESG areas, from a world that sets the standard for better living and cities to rely on carbon-free energy by 2035. decarbonization and energy reliability, to affordability better working, running more efficiently and cost and accessibility, employee health and safety, the effectively, for the betterment of all. The City is focused on equitable placement of EV environmental and social impacts of its supply chain, infrastructure across Los Angeles, leveraging state and and enterprise risk and resilience. Central to its strategy Now is the time to help deliver on the promise of a federal funding—including historic investments in the is the reporting and disclosure of comprehensive data Modern Government—one that is connected, EV sector in the 2021 Infrastructure Investment and related to the implementation of ESG goals. NYPA aims powered, and trusted, creating positive change that Jobs Act—for the mass adoption of EVs. to become among the first U.S. utilities and benefits government workers, constituents, and government entities to issue an integrated report for the communities. 2022 reporting cycle. Sources: Department of the Army, Office of the Assistant Secretary of the Army for Installations, Energy and Environment. February 2022. United States Army Climate Strategy. Washington, DC. New York Power Authority 2021-2025 Sustainability Plan Morehouse School of Medicine National COVID-19 Resiliency Network website City of Los Angeles Electric Vehicle Master Plan Environmental, Social, and Governance: 17 Environmental, Social, and Governance: Government leadership as a catalyst for success Government leadership as a catalyst for success 18 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
KPMG stands ready About the research to help KPMG conducted three surveys during February, March, and April 2022 to better understand the opinions of both U.S. government employees and the U.S. public as it We were one of the first firms in our profession to bring relates to governments' approach to ESG. The survey conducted among federal government employees ESG commitments under one umbrella, codified in our included 200 professionals from various areas of federal KPMG IMPACT plan. The document includes a road government, including civilian, Department of Defense, map to reduce our impact on the environment and and intelligence agency employees. The survey create an inclusive, caring, and values-led culture for our conducted among state and city government employees people. included 227 professionals from across state and city governments. The third survey was conducted among In addition to walking the talk ourselves, we have deep 1,000 U.S. residents randomly selected to represent the experience helping clients address critical ESG issues— current breakdowns of U.S. gender and age including decarbonization, strategic planning, reporting, demographics. asset and climate modeling, health equity, DEI, cybersecurity, and enterprise risk management. We can help create the right blueprint to integrate ESG into your mission and operations. We can help simplify your strategy and guide its full implementation so that you can take the lead on ESG. Survey respondents With more than 100 years of experience serving Federal government State and city governments, we have a deep understanding of capital- intensive, complex infrastructure, and data-driven U.S. residents: employees: government employees: technology, and bring a complete suite of tailored methodologies, tools, and accelerators. Leveraging an approach that is both holistic and practical, we go 1,000 200 227 beyond strategy, working side by side with you at each step of your ESG journey. We work hard to make your goal our goal: creating positive change that benefits government workers, constituents, and communities. That is, a government that is connected, powered, and trusted. Environmental, Social, and Governance: Government leadership as a catalyst for success 20 Environmental, Social, and Governance: Government leadership as a catalyst for success 19 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
KPMG stands ready About the research to help KPMG conducted three surveys during February, March, and April 2022 to better understand the opinions of both U.S. government employees and the U.S. public as it We were one of the first firms in our profession to bring relates to governments' approach to ESG. The survey conducted among federal government employees ESG commitments under one umbrella, codified in our included 200 professionals from various areas of federal KPMG IMPACT plan. The document includes a road government, including civilian, Department of Defense, map to reduce our impact on the environment and and intelligence agency employees. The survey create an inclusive, caring, and values-led culture for our conducted among state and city government employees people. included 227 professionals from across state and city governments. The third survey was conducted among In addition to walking the talk ourselves, we have deep 1,000 U.S. residents randomly selected to represent the experience helping clients address critical ESG issues— current breakdowns of U.S. gender and age including decarbonization, strategic planning, reporting, demographics. asset and climate modeling, health equity, DEI, cybersecurity, and enterprise risk management. We can help create the right blueprint to integrate ESG into your mission and operations. We can help simplify your strategy and guide its full implementation so that you can take the lead on ESG. Survey respondents With more than 100 years of experience serving Federal government State and city governments, we have a deep understanding of capital- intensive, complex infrastructure, and data-driven U.S. residents:employees:government employees: technology, and bring a complete suite of tailored methodologies, tools, and accelerators. Leveraging an approach that is both holistic and practical, we go 1,000 200227 beyond strategy, working side by side with you at each step of your ESG journey. We work hard to make your goal our goal: creating positive change that benefits government workers, constituents, and communities. That is, a government that is connected, powered, and trusted. Environmental, Social, and Governance: Government leadership as a catalyst for success 20 Environmental, Social, and Governance: Government leadership as a catalyst for success 19 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Contact Us Lorna Stark Brenda Walker Partner, National Sector Leader Partner, Federal Advisory Leader for Government 703-286-8621 917-601-7336 [email protected] [email protected] Corinne Dougherty Partner, ESG Government Leader 202-533-7066 [email protected] In collaboration with KPMG Ignition Take your organization to unexpected places with KPMG Ignition. We are a specialized team that thinks and works differently to produce differentiated results for our clients. Using advanced capabilities and services from across KPMG, we curate bespoke experiences to guide you on how you can take your organization further. We’ll help you to see beyond the now, sensing opportunities and possibilities for newer, faster, and better outcomes for your organization. Learn more at visit.kpmg.us/Ignition. Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities. www.kpmg.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2022 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
