M&A and ESG: An Introduction to Ensuring Sustainable Value in the Corporate Transaction
This blog post is the first in a series co-authored with EPOCH Pi, a Certified B Corp investment bank that helps purpose-driven clients prosper by combining traditional investment banking services with cultural integration tools that identify values-aligned partners.
Environmental, social and governance (ESG) factors have become a growing focus for companies and their stakeholders. In addition to being essential to company culture and reputation, ESG matters are increasingly considered important value drivers for successful M&A transactions.
Investors are becoming more and more concerned with ESG metrics that can protect and maximize value and are considering the impact of such matters in their screening process, transaction risk mitigation, due diligence and other strategic decision-making.
According to a recent report from the US SIF Foundation, sustainable investing assets now account for $17.1 trillion — 1 of every 3 dollars of the total U.S. assets under professional management.
Even large institutional investors and asset management companies like State Street Global Advisors and BlackRock have issued statements stressing the importance of ESG issues in business practices and transactions decisions.
M&A deals often present exciting opportunities with mutually beneficial outcomes and synergies, but the parties involved are susceptible to risks, including credit rating downgrades, consumer and reputational backlash and lackluster financial performance.
To curb some of this possible risk, potential partners may want to make sure that they are entering agreements with entities that commit to appropriate environmental practices and climate adaptation plans, operate within a humane supply chain free from violations and corruption, present an active community engagement record, and have a general reputation of regulatory compliance.