Key findings of the KPMG ESG Risk Survey 2025
The financial world is undergoing profound change: environmental problems, social expectations and geopolitical instability are increasing the pressure on banks. The interlinked challenges are jeopardizing the long-term stability of financial institutions. At the same time, external requirements are becoming stricter – for example due to the omnibus package and new EBA guidelines. ESG risk management is therefore no longer just strategically relevant, but a clear regulatory expectation.
The fifth edition of the international KPMG ESG benchmark survey shows how banks are responding to developments, what strategies they are pursuing and where there is a need for action. The study offers global insights, enables benchmarking and provides impetus for further improving ESG risk management.
Responses from over 100 banks from 19 countries
ESG risks have become massively more important in recent years. Against the backdrop of geopolitical tensions and increasing regulation, banks must systematically integrate ESG aspects into their risk management processes. The KPMG ESG Risk Study 2025, based on the responses of over 100 banks from 19 countries, provides a comprehensive overview of the market: It shows progress, existing gaps and key issues for the coming years. The focus is on three key areas that will be particularly relevant in the near future: Transition planning, the development of Key Risk Indicators (KRIs) and the integration of natural risks. The key findings of the study and recommendations on the key topics are presented below.
The KPMG ESG Risk Survey 2025 paints a clear picture: despite geopolitical uncertainties, social changes and new regulatory requirements, around 70 percent of the banks surveyed are sticking to their existing ESG risk strategies. This continuity is no coincidence, but an expression of a long-term commitment to integrating ESG factors into risk management. This is because these factors are seen as key drivers that are no longer only anchored in strategic discussions, but increasingly in operational processes. At the same time, pressure from supervisory authorities is growing. The European Central Bank (ECB) continues to make it clear that ESG risks must be systematically integrated into risk management: Those who do not meet the requirements on time must expect sanctions. The ECB is thus sending a strong signal – banks should support the transition to a climate-neutral economy and integrate ESG risks appropriately into their risk management processes. With regard to the maturity of this integration, the results of the study are clear: as can be seen in Figure 1, most of the findings and identified need for further development are in the areas of business strategy, business environment analysis and credit risk.
Fig. 1: Most of the findings and areas identified as requiring further development are in the areas of business strategy, business environment analysis and credit risk.
As part of the materiality analysis, most institutions have recognized that climate and environmental risks are key drivers – particularly for credit, business and operational risks. The main influencing factors include extreme weather events, regulatory changes and chronic physical risks. Despite progress in identifying risk drivers, there are still gaps in certain risk types, such as concentration or strategic risk. These weaknesses can lead to “blind spots” in ESG risk management. Eliminating them is crucial for holistic risk management and its resilience.
Progress can be seen in capital planning: almost 2 out of 3 study participants in the category of significant institutions (SI) take ESG risks into account in the ICAAP, mostly via a capital buffer of around 0.5 percent. A third go further and set buffers of over 2 percent – a clear sign of growing awareness. Nevertheless, almost half of the banks lack integration in the normative perspective and around 80 percent in their basic planning. The risk: although institutions are prepared for short-term shocks, they underestimate the long-term challenges.
Foundations for sustainable ESG risk management
The study also makes it clear which topics will be crucial in the coming years: the further development of transition planning, the introduction of KRIs and the integration of natural risks. These fields of action create important foundations for sustainable ESG risk management.
The transition to a climate-neutral economy is one of the biggest challenges for banks. As key financiers of economic activities, their decisions can accelerate or slow down the transition. Transition plans – or ESG risk plans according to the German BRUBEG nomenclature – are the decisive instrument here: they translate strategic ambitions into concrete measures. As can be seen in Figure 2, the plans are more than just a sustainability appendix – they are strategic roadmaps that define how institutions manage ESG risks and adapt their business models to long-term changes. They create goals, define responsibilities and integrate sustainability into products, processes and customer relationships. Banks that act early not only ensure regulatory compliance, but also open up new opportunities in a decarbonized economy.
Fig. 2: Plans as strategic roadmaps that define how institutions manage ESG risks and adapt their business models to long-term changes.
Another focus is on the development of KRIs. These indicators are not only required by regulation, but are also essential for the management of ESG risks. According to Figure 3, financed greenhouse gas emissions (Scope 1-3) and the integration of physical risks in scenario analyses are particularly often already implemented. As European regulators require a large number of KRIs, most banks start the implementation process by prioritizing a subset of KPIs. Here, it is advisable to initially focus on KRIs that are highly relevant to the bank’s management and KRIs that can be implemented with little effort. Remaining KRIs can then be weighted according to importance and implemented one after the other. This creates an individual management system that meets regulatory requirements and supports banks in making strategic decisions.
Fig. 3: Financed greenhouse gas emissions (Scope 1-3) and the integration of physical risks in scenario analyses are often already implemented.
Nature risks are also the focus of regulators, although a change of perspective is urgently needed here: Away from stand-alone, flat-rate sector or country-wide average values, towards a supplementation with location-based analyses at site level that take into account the spatial heterogeneity of biodiversity and ecosystem services. Although almost 60% of banks already carry out materiality analyses with regard to natural risks, these are currently predominantly based on ENCORE, i.e. on sector-specific proxy data. Only very few institutions use the combination with EXIOBASE to analyze supply chains. Location-based data is only used by 25% of institutions for their analyses – even though there are a large number of usable raw data sources on the market at location level that adequately map nature-related risk drivers. At the same time, over a third of institutions are already developing transition plans for natural risks in order to ensure long-term environmental and financial resilience.
The ESG Risk Study 2025 shows that banks worldwide have recognized the relevance of ESG risks and are taking measures to integrate them into their risk management systems. In doing so, they face the challenge of meeting regulatory requirements, making strategic adjustments and developing operational processes at the same time. In particular, the topics of transition planning, natural risks and integration into capital planning processes will become increasingly important in the coming years. Banks that act early and systematically address ESG risks will strengthen their resilience and competitiveness in the financial market in the long term.