ESG Due Diligence

ESG issues can have direct financial, operational, and reputational impacts on businesses; therefore, these matters should be considered during due diligence reviews of potential investments. 

ESG Due Diligence and Private Equity

Understanding the known and potential risks involved with an acquisition, transaction, partnership, or investment is critical to protecting businesses from legal, reputational, and financial liability. RPS leverages its ESG expertise and decades of multi-disciplinary experience to optimize the due diligence process. Specifically, RPS focuses on simplifying the ESG due diligence review, identifying key ESG issues, and minimizing the burden on the potential investment’s management team. 

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Minimizing Risk

The increasing pressure from limited partners to align investment practices with ESG policies and outcomes has led to a sharp increase in the number of private equity firms committing to the integration of ESG values and frameworks.  As a result, ESG strategy integration has become an issue of value protection, creation, and alignment. 

Expectations and regulations regarding ESG and sustainability reporting have followed this trend, raising with them the business value impacts of ESG mismanagement considerably. Volkswagen’s emissions scandal, Foxconn’s employee mistreatment, and Monsanto and Johnson & Johnson’s product liability cases are all examples of incidents that impacted share value and cost millions of additional dollars in legal fees and settlements. Additionally, non-reputational damage risks include environmental compliance fines, employee retention and training costs, supply chain disruptions, and failure to prepare for climate impacts.  

Assessing ESG performance and identifying potential risks, deficient practices, and key opportunities for improvement is now a vital part of protecting firms against material loss, and can have impacts on negotiations around acquisitions, and as firms prepare for sale. 

Maximizing Return

Integrating ESG review into the due diligence process can help identify new opportunities for growth and improvement. It can also facilitate benchmarking against peer and industry ESG behaviors and provides a measure for past and future improvement through ownership. Sell-side ESG diligence is an effective way of communicating improvements and demonstrating value at the exit stage of the investment cycle.  

It should be noted that the due diligence process generally takes place in a short timeframe and a company may have dozens of applicable ESG factors, so the prioritization of the right ESG considerations is key to achieving these benefits.

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An effective ESG review should be customized to a target investment’s needs, industries, and product or service offerings, without compromising the necessary breadth of the analysis.

Our Approach - Tailored for You

Providing reviews across supply chains, product stewardship, human capital, climate change/climate resiliency, carbon emissions, waste minimization, biodiversity impacts, water quality/rights, fuel, and energy efficiency, we have the breadth of experience and specific expertise to provide a comprehensive and customized ESG due diligence review of target investments. 

Specifically, we can help: 

  • Eliminate deal issue threats; 
  • Highlight deficient standards; 
  • Pinpoint key ESG opportunities for improvement post-acquisition; 
  • Highlight enterprise customers’ sustainability expectations; 
  • Understand changing consumer expectations; 
  • Understand industry-level trends; and 
  • Identify regulatory liability. 

Comprehensive ESG Services

With decades of multi-disciplinary due diligence experience and a wealth of ESG expertise, RPS can work within a firm’s specific ESG needs, providing standalone ESG due diligence, or integrating existing firm-level ESG policies and frameworks into the ESG due diligence process. 

Identifying key ESG opportunities for improvement in a target investment can provide firms with a head-start in maximizing growth and performance during ownership. RPS provides the tools to maximize and streamline the integration and measurement of these identified opportunities.  

Our proprietary online KPI platform allows firms to track their progress on identified ESG opportunities from the acquisition to exit. 

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