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• Lack of robust data, inadequate understanding of what ESG due diligence means, and difficulty in selecting a meaningful scope cited as top challenges in conducting due diligence
• Majority say deal cancellation was the most common consequence of a material finding during ESG due diligence

New York, July 27, 2023 â€� With a heightened focus on sustainability reporting from investors and regulators alike, a majority of corporate investors want a dedicated ESG due diligence product that can analyze risks and opportunities, according to ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø’s recent ESG Due Diligence Survey.

“The data speaks loud and clear: Companies and investors are increasingly integrating ESG considerations into their M&A strategies, not only because it’s the right and responsible thing to do but also because of the value implications of ESG,â€� said ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø U.S. ESG and Climate Services Leader Mark Golovcsenko. “At ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø, we stand committed to empowering organizations to navigate this paradigm shift, as sustainability is not just an aspiration but inextricably linked to value creation.â€�

The survey features insights from over 200 M&A practitioners � corporate investors, financial investors and M&A debt providers � in the U.S. and Europe, Middle East and Africa (EMA) on how ESG due diligence affects their M&A transactions.

Key findings:

• 74% have ESG considerations as part of their M&A agenda, but only 51% possess a proper understanding of ESG in their area of investment.
• Most investors (74% of U.S. and 82% of EMA) are now including ESG in their M&A agenda including 72% of financial investors and 76% of corporate investors in the U.S. compared to 94% and 77% of EMA investors respectively.  
• Investors will be conducting ESG diligence more frequently in the future, with 48% of EMA and 27% of U.S. investors now saying they will do it frequently (on more than 80% of deals), up from 25% for EMA and 16% for the U.S. for the previous two years.
• 68% of EMA investors and 62% in the U.S. said they would pay a premium for a target that demonstrates a high level of ESG maturity that is in line with their ESG priorities.  

Impacting Deals

• 53% of U.S. and 66% of EMA investors said deal cancellation was the top consequence of a material finding.
• Conversely, 76% of debt providers to M&A said they went ahead with financing or underwriting, but with more conservative conditions, as a consequence of material findings.
• 54% of EMA and 56% of U.S. investors reported that selecting a meaningful yet manageable scope was one of the main challenges for ESG due diligence.
• In addition, 49% of EMA and 59% of U.S. investors named the “lack of robust data or written policies of allegedly followed practices at the targetâ€� as a challenge.

“As the world continues to evolve, so do the expectations of businesses,â€� said ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø U.S. Partner, ESG Clare Lunn. “Our latest ESG Due Diligence Survey reveals an undeniable truth: Sustainable practices are no longer just a choice but a prerequisite for resilience and growth.â€�