ESG due diligence
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In light of recent regulatory focus on ESG (Envirnomental and Social Governance):
How often do you see ESG due diligence as part of due diligence procedures?
What are the most common ESG due diligence procedures that you observe?
Was lack of or insufficient ESG procedures in a target company ever a deal-breaker in a M&A transaction?
1. ESG Due Diligence Frequency:
ESG (Environmental, Social, and Governance) due diligence is becoming increasingly common, especially in industries with high regulatory scrutiny or environmental impacts. As ESG factors become a focus for investors and regulators, they are now a standard part of many M&A transactions.2. Common ESG Due Diligence Procedures:
Environmental Impact Assessments: Reviewing compliance with environmental regulations and evaluating sustainability initiatives.
Social Governance: Assessing labor practices, diversity policies, and community engagement.
Governance Audits: Reviewing board practices, executive compensation, and ethical governance policies.3. Deal-Breakers:
Yes, the lack of or insufficient ESG procedures can be a deal-breaker, particularly in transactions where ESG compliance is critical to the buyer’s business strategy or regulatory requirements. Deficiencies in environmental compliance or social responsibility could result in reputational risks or legal liabilities.
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