Sustainability has become one of the defining megatrends affecting businesses worldwide, and the M&A world is no exception. To find out what this means for dealmakers across Europe, the Middle East, and Africa, KPMG surveyed more than 150 active dealmakers across these regions. Despite not involving Belgian Dealmakers, the results yield interesting findings that are also attributable to the Belgian market.
We observe that the use of Environmental, Social, and Governance (ESG) criteria in decision-making is already a reality, but that there are still challenges to overcome, like the lack of robust methodology, reliable data, or the flexible scope.
We also found that there are different levels of maturity, ranging from leaders who only invest in targets that are aligned with their ESG priorities or that can be aligned with those priorities (value creation perspective); to those who have not yet grasped their sustainable context and who, in the case of ESG Due Diligence, do so purely from a risk perspective.
Positively, regulatory actions are elevating ESG to the top of the company strategy priority list. New regulations concerning the disclosure of non-financial information will be (and are) one of the primary forces behind the strengthening of ESG Due Diligence practices through the development of reliable and comparable reporting frameworks on this Long Road to Sustainability.
Takeaways from the ESG EMA Due Diligence Study
- Dealmakers are actively integrating ESG considerations into their deal activities.
- Investors are willing to pay to pay a premium for a target that demonstrates a high level of ESG maturity in areas that align to their ESG priorities.
- The lack of data and documentation, and selecting a meaningful, yet manageable scope, are two of the major challenges faced by ESG Due Diligence practitioners.
- Mature ESG Due Diligence practitioners are making a strong link between their overarching corporate sustainability strategy and their ESG Due Diligence procedures, putting significant focus on helping investees tap into ESG-related value creation opportunities.
- ESG Due Diligence budgets are lagging behind those of other workstreams such as commercial, financial, or legal.
How can KPMG help?
As some of the world’s leading deal advisory and sustainability service providers, KPMG is at the nexus of the intersection between M&A and ESG. Every day, our KPMG professionals are at the forefront of the developments taking place in this rapidly evolving field. Our specialists are working with many of the leading corporate and financial investors to identify and develop ESG-related deal strategies and processes that meet their unique needs and objectives.
We can help leading investors and dealmakers with:
- Developing the corporate sustainability strategy
- Linking the M&A strategy to corporate strategy
- Developing an ESG Due Diligence framework
- Performing ESG Due Diligence procedures