–> This is a pre-event interview in the run-up to the Leaders in Sustainable Finance Event on February 1, 2024.
Jeroen: Thanks, Menno, for taking the time to speak to Leaders in Finance in the run-up to the Leaders in Sustainable Finance event on the 1st of February 2024. First of all, could you please introduce yourself?
Menno: My name is Menno Kooistra. I lead ESG Advisory services at KPMG Netherlands and have over two decades of experience in the financial services industry.
Jeroen: That is great. Are there many people within KPMG working on this topic?
Menno: Certainly, within the advisory realm, we have a team of 300 professionals focused on supporting KPMG’s clients on ESG initiatives. The most mature facets are the environmental (E) and governance (G) aspects. The social (S) dimension is actively evolving, for instance with a human rights and social team that is growing rapidly at the moment.
Jeroen: Great. If you could pick something that you like about your current role, what would it be?
Menno: One aspect I particularly enjoy is the multidisciplinary nature of ESG advisory. Sustainability and ESG is relevant to every part of a business. So, in conversations with clients, for example with a CFO, we might find ourselves discussing how to identify and mitigate ESG-related risks or how to generate and manage reliable ESG data or how to integrate ESG considerations into financial management processes. The conversations around sustainable transformation can go in many directions and I enjoy working with clients to find solutions to their different challenges and perspectives.
Jeroen: Makes sense. When you think about ESG or sustainable finance, what do you think about?
Menno: I think it is important to remember that the EU has committed to a sustainable transition where the flow of capital is diverted towards sustainable businesses and away from those that are not considered sustainable. So we need to think of the financial services sector as the engine that drives the whole transition. Within the financial sector itself, a key consideration is working out what true sustainability actually looks like. It’s a whole chain of issues from the ESG impacts of financial services, to the use of data and transparency of reporting and to the policies and norms of working. It’s all spurred on by the urgency and compliance obligations of regulations like the Sustainable Finance Disclosure Regulation (SFDR), the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). It is complex and can be daunting so I think it’s important to break the enormity of it down into specific challenges that can be addressed in practical terms. I have so many discussions with our clients where we help to clarify what sustainability looks like for them in practical terms and where the immediate priorities lie. It is both challenging and rewarding at the same time. I find it especially satisfying when I see that the ongoing efforts to clarify and enhance sustainable practices for financial industry players, and the growing openness and transparency in financial products, contribute to the broader goal of making a positive impact on the world.
Jeroen: Certainly, your unique perspective allows you to observe the diverse landscape of financial institutions navigating the transition. Do you notice a difference in how organisations deal with the process, do some find it difficult and complex, while others embrace it?
Menno: There is a general willingness in the industry to embrace change and I think almost everyone is on the same page about the need for change. At the same time, the complexity of the challenge is undeniable. Some institutions choose to go more slowly and to claim that their existing approach to sustainability is enough for the moment. Others move at a quicker pace; but this is the same in any sector – there are always leaders and laggards. However, in my conversations I see a collective understanding of the urgent need to speed up efforts and come into action.
Jeroen: You kind of alluded already to it, but what would you say is the largest challenge for financial institutions in this transition?
Menno: The largest challenge I see is what we at KPMG call “the great sustainability data challenge”. Nothing can happen without the ESG data – it’s the critical foundation for decisions and action. The flow of data is improving and will continue to improve with regulation like CSRD and CSDD and that is a positive development, but new questions continue to arise around how to scale the accessibility of data, how to ensure the quality and comprehensiveness of data, et cetera. The data discussion is rapidly gaining prominence and it is one that I see as absolutely paramount because genuine progress can’t happen until we’ve solved the data challenge.
Jeroen: And what would you say are the interesting opportunities?
Menno: One of the key opportunities I see is the increasing focus on impact. The financial services sector is unique in terms of the ESG impacts it has on the wider world via the financing it provides. There is a growing focus in the industry on how to improve the understanding, measurement and management of the ESG impacts of the financial sector – for example the issue of “financed emissions”. In the past, financial activities were largely undertaken without a comprehensive understanding of their impact on people or the environment. Now there is much more attention on transparency of impact. Many financial institutions are embracing the challenge and moving forward with a commitment to positive impact. While these institutions often have great knowledge of their products, a challenge emerges on a European or global scale—how can you scale sustainable financial products? And how can you define clear criteria for success in generating positive impacts and to demonstrate that an institution is truly aligned and able to deliver? This is a complex struggle. Although it is a challenge, it can also be a competitive advantage when you are doing it right.
Jeroen: Do you have a view on where we stand as the financial services industry in the Netherlands compared to either Europe or the world?
Menno: The regulatory landscape in Europe is setting the pace globally. Even though regulations like the CSRD and CSDDD apply only in Europe, the European operations of multi-national companies come within scope and need to comply. So European regulations are having a significant global impact. However, in terms of implementing similar regulations in other regions, the United States or Asia, for example, seem to be taking a wait-and-see approach, observing the developments in Europe and assessing the impact. Currently, Europe is making strong efforts to lead the way in sustainable initiatives and regulations.
Jeroen: So you could say that is actually a topic where Europe is ahead?
Menno: Yes, it is a significant topic. However, I also see some pushback from companies and conversations about the fairness or unfairness of the regulations. But this is to be expected. New regulation is never universally welcomed and the first movers face the most challenges, but it provides valuable learning experiences. From a U.S. perspective, there is an opportunity to learn from these experiences. They are adopting the positive aspects as well. It’s fascinating to engage in conversations with clients from both the American and European financial landscapes.
Jeroen: The last question from my end is about the event on the first of February. What about the Leaders in Sustainable Finance event are you looking forward to in particular?
Menno: For me, it is a combination of connections and content. There is an opportunity to meet a lot of people in the Dutch financial services sector – some I already know and some I will meet fo the first time. Additionally, I am looking forward to the content aspect. What can we learn from each other? What kind of platforms are in place? As of now, on the first of February, it is about learning from others, combining the joint opportunities to network and to gain new insights.
Jeroen: Great. Menno Kooistra, KPMG Partner & Head of ESG Advisory, thanks a lot for taking the time to talk to Leaders in Finance. I am looking forward to having you at the Leaders in Sustainable Finance event on the first of February this year. Thank you!
Menno: You are welcome!
–> This is a pre-event interview in the run-up to the Leaders in Sustainable Finance Event on February 1, 2024.