KPMG resigns from Grenfell inquiry amid public outcry

09 January 2018 Consultancy.uk

After days of sustained public pressure, KPMG has announced its withdrawal from its supporting role in the Grenfell inquiry. The firm took the decision following a campaign that called for Theresa May to overturn their appointment, amid claims of conflicts of interest, as KPMG have earned substantial amounts from auditing a number of parties allegedly implicated in the lethal fire of 2017.

The Grenfell tower fire cost a confirmed 71 people their lives on 14 June last year, and left many more homeless. The blaze spread rapidly up the residential tower block in London, after decorative cladding caught fire. The cladding system on Grenfell Tower was reportedly passed by a building control officer from the Royal Borough of Kensington and Chelsea on 15 May 2015, despite a nationwide warning that the combustible insulation it featured should only be used in conjunction with cladding that does not burn. Some residents later reported that fire alarms in the building had failed to sound, while others confirmed that official advice given to them by local council directives had said to “stay put” in the event of a fire – something which would likely have seen them among the number killed.

On 15 August 2017 the Prime Minister set the terms of reference for an official inquiry into the tragedy. The Royal Borough of Kensington and Chelsea, Rydon and Celotex were three parties expected to come under scrutiny via the process – and were also at the heart of the latest controversy involving the inquiry. KPMG, a firm which has previously worked for all three parties, was announced as an official advisory partner of the inquiry.

KPMG resigns from Grenfell inquiry amid public outcry

Rydon, who installed Grenfell’s cladding system, had reportedly paid KPMG £3.5 million for its services, prior to the appointment, while the group also provided £1 million in auditing work to Saint-Goban Construction Products – who own Celotex, the creators of the synthetic insulation that the cladding was installed on top of. Most importantly, however, KPMG had also earned almost £1 million in auditing fees from the Royal Borough of Kensington and Chelsea (RBKC) – the council whose alleged failings sit at the heart of the catastrophe of Grenfell. The council has been heavily criticised for ignoring residents’ concerns before and after the deadly fire.

Once it became public knowledge, KPMG’s appointment subsequently provoked instant furore, with a long list of high-profile critics calling for a reversal of the hire, claiming the firm had failed to disclose a major conflict of interest. Pop star Lily Allen, and Labour MPs - Clive Lewis and Emma Dent-Coad, the recently elected MP for Kensington, joined a host of academics and campaigners in the signing of an open letter to beleaguered Theresa May, condemning the selection. Now, the Big Four professional services firm has revealed that it has backed out of its role in the inquiry. The multinational corporation had been in line for a £200,000 paycheque to assist with the process over three months.

Alleged conflict

The Cabinet Office had confirmed the hiring of the firm to provide 'planning and programme management support' just days before the dramatic turnaround, amid mounting public pressure. According to the British press, the three-month, £200,000 contract was awarded in a fast-track process and no other bidders were considered.

When challenged by the London Evening Standard about the hiring of KPMG, the inquiry was forced to admit that it was unaware that KPMG had been employed by Celotex – though it also confessed it had known about its connection with both Rydon and RBKC. Regardless, the inquiry’s organisers believed that the firm was needed to get the inquiry underway “rapidly”, adding that the consultancy firm would play “no role in its investigative or decision-making processes”. Confidentiality clauses were in place to prevent conflicts of interest, they said.

A statement from KPMG, who have waived fees for work undertaken on the project to date, said that its role on the inquiry as project management advisor was "purely operational" and that it had no role advising "on the substance of the inquiry".

A spokesperson added, "Whilst we are confident that no conflicts exist between our role advising the inquiry and our work for other clients, we recognise that strength of opinion about our role risks undermining confidence in the Inquiry.”

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Private equity firms ramp up sustainability focus

19 April 2019 Consultancy.uk

In line with business leaders across the industrial gamut, private equity firms are increasingly on board with sustainability projects. According to a new study, the investment arms for major funds are implementing a number of strategies aimed at supporting sustainable economic development in line with global goals.

While the business world has finally begun to acknowledge the danger of climate change, effective action plans remain difficult to achieve. The Paris Agreement has stipulated a clear target for the decades leading up to 2100, although massively reducing emissions while not crashing the economy could be a tall order.

Businesses that are able to acquire capital can use it to boost productivity and output, thereby creating a virtuous cycle of development. However, some businesses are better able to utilise resources than others, both in terms of their relative productivity, as well as the value of the respective outcomes relative to costs (including environmental harms). Financing can therefore provide an avenue to select businesses that are aligned with various global sustainability goals, while shunning those that drive little or unsustainable social value creation.

Top moves made by investment arms towards responsible investment

Profit has for the longest time been the central criterion for investment decisions. Yet profit at any cost is increasingly seen as creating considerable social harms, while often delivering only marginal value. As a result, the private equity sector, which was initially sluggish to change its ways with regards to sustainability, has started to see the topic as an opportunity as much as a challenge.

A new study from PwC has explored how far sustainability goals have become part of the wider investment strategy for private equity (PE) firms. The report is based on analysis of a survey of 162 firms and includes responses from 145 general partners and 38 limited partners.

Maturing sustainability

Top-line results show that responsible investment has become an issue for 91% of respondents. For 81% of respondents, ESG (environmental, social, and corporate governance) was a board matter at least once a year, while 60% said that they already have implemented measures to address human rights issues. Two-thirds have identified and prioritised Sustainable Development goals that are relevant to their investment segments.

Change in concern and action on climate-related topics over time

While there is increasing concern around key issues, from human rights protections to environmental and biodiversity protection, the study finds there are mismatches between concern and action. For instance, concern among investment vehicles around climate change has increased since 2016.

In terms of risks to the PE firm itself, concern has increased from 46% of respondents in 2016 to 58% in the latest survey. However, the number who have taken action remains far below those concerned, at 9% in 2016 and 20% in 2019. Given the relatively broader scope of investment opportunities, portfolio companies face higher risks – and more concern – from PE professionals, at 83% in the latest survey. However, action is less than half of those concerned, at 31%.

Changing climate

In terms of the climate footprint of the portfolio companies, 77% of respondents state concern in the latest survey. 28% of respondents are taking action through the implementation of measures to mitigate their concerns.

Concern and action taken on ESG issues

In terms of the more pressing issues for emerging responsible investment or ESG issues, governance concern of portfolio companies comes in at number one (92% of respondents), while 60% have taken action on it. Firms have focused on improving awareness – setting up policies and a range of training modules for their professionals around responsible investment decision making. Cybersecurity takes the number two spot, with 89% concerned and 41% implementing strategies to mitigate risks.

Climate risks take the number three spot in terms of concern for portfolio companies (83%), but falls behind in terms of action (31%). Health and safety track records are a key concern at 80% of businesses, with 49% implementing action. Gender imbalance within PE firms themselves ranks at 78%, which is being dealt with by 31%. A recent survey from Oliver Wyman showed that there is gender balance at 13% of GP teams in developed countries.

Biodiversity is also an increasingly pertinent topic, with risks from pollution and chemical use increasingly driving wider systematic risks around environmental outcomes. It featured at number eight on the ranking of most likely global risks for the coming decade, with its impact at number six. As it stands, biodiversity is noted as an issue at 57% of firms, with 15% implementing action.