DealLawyers.com Blog

My colleague Lawrence Heim shared with me a new KPMG study on global ESG due diligence practices in M&A transactions. The study finds that despite a challenging deal environment and ‘ESG backlash’ in the US, ESG issues are increasingly important in M&A transactions. Here are some of the key findings:

– Four out of five dealmakers globally indicate that ESG considerations are on their M&A agenda, with little regional variation. Even more explicitly, 71% of respondents report an increase in importance of ESG in transactions in the last 12 to 18 months.

– Investors expect the frequency of ESG due diligence on transactions to increase evenfurther. Globally, 57% of respondents say they expect to perform ESG due diligence on most of their transactions over the next two years (up from 44% historically). On the opposite side of the scale, only 6% say they will continue not toconduct any ESG due diligence over the same time period (down from 19% historically).

– 58% of global respondents report conducting ESG due diligence primarily because they believe in the monetary value of identifying sustainability-related risks and opportunities early in the deal process.

– Almost three in four respondents across the regions confirm they perceive ESG due diligence as more important because of changing stakeholder requirements. What this means, however, can vary from business to business. For example, for general partners of private equity funds, the requirements of their limited partners (LPs) play an important role.

The study also addresses ESG due diligence best practices and identifies ESG “value creation levers” and the challenges dealmakers face in conducting due diligence investigations into ESG-related topics.

– John Jenkins