Market Commentary

ESG: managing risks and capitalising on opportunities in M&A transactions

Posted by Anton Murray Consulting on . Posted in Market Commentary


The rising focus in the Australian market on environmental, social and governance (ESG) issues is now finding its way into more and more acquisitions, both as a driver for M&A and as a part of due diligence. Buyers are focused on how they can best capture sustainable and ethical opportunities, and how they can achieve maximum value and monitor for ESG risks. This can take the form of dovetailing the acquisition with their own processes for ensuring transparency on climate risk, social justice, sustainability and corporate governance.

There is no doubt that ESG is now a key risk for buyers. Poor ESG can have reputational, financial and sometimes legal consequences for the buyer. As a result, we are seeing private equity funds and strategic acquirers looking for due diligence to include an ESG-focus. That due diligence is designed to both understand the risks and to identify value opportunities. There will be opportunities for those buyers who develop an effective and verifiable ESG risk and governance model. An increasing number of significant Australian and overseas private equity and other funds use sustainability or ESG metrics as a value add, or increasingly as a focus for standalone ESG or impact funds.

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