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.