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. 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