When it comes to the risks and opportunities of ESG in financial transactions we have seen companies making divestments and acquisition decisions based on ESG-related factors and performance.
Such activity has taken the form of a company's strategically planned corporate activity or activists forcing or preventing a corporate transaction.
ESG due diligence is becoming more commonplace alongside legal and financial due diligence in transactions.
ESG-related due diligence considerations include the maturity of a target's program, risks related to that program not being in place or being immature when compared to the acquirer's.
Acquirers want to see an alignment between their ESG program and their target, or the impact on value and risk if the maturity of a program is low.
Managing ESG impacts is no longer a 'nice-to-have', but a necessary piece of business planning and risk management. Companies are under increasing pressure from stakeholders to demonstrate they are taking a thoughtful, rigorous and defensible approach to ESG.
With the right processes and reporting in place, a robust ESG program can generate significant value for a company, its customers, investors and business partners. Impactful ESG strategies can enhance a business' overall long-term resilience.
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