The growing importance of ESG to EMEA M&A
The dangers of climate change and the need for the world to shift to a more sustainable and less carbon-intensive economic model have never been clearer. It is no wonder that environmental, social and corporate governance (ESG) concerns have risen up the corporate agenda in recent years from an afterthought to an essential business function, with the COVID-19 pandemic proving a major accelerant.
1. Less than half of dealmakers are conducting ESG due diligence on target supply chains
Although a significant number of those polled (46 percent) have undertaken ESG due diligence on a target’s supply chain, this is still less than half of respondents. This opens bidders up to potential risk. Private equity (PE) and other financial sponsors are ahead on this issue, with 65 percent saying they conduct ESG due diligence on supply chains compared to only 27 percent of corporates.
2. Room for improvement in ESG due diligence data
Even though ESG has risen up the agenda for M&A practitioners in Europe, there is still room for improvement in terms of the availability and quality of data available. Only 16 percent of respondents say the quality and comprehensiveness of ESG due diligence data available to them in their last deal was “very good,” with 30 percent merely deeming it “acceptable” and a further 19 percent who say it was "poor" or "very poor."