ESG due diligence

ESG issues can have direct financial, operational, and reputational impacts on businesses, so they should always 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 liabilities.

As both strategic advisors and technical consultants, we optimise the due diligence process, enabling you to create value with confidence.

Our approach simplifies the ESG due diligence review, identifies key ESG issues, and minimises the burden on the potential investment’s management team.

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Minimising 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, heightening the business value impacts of ESG mismanagement. 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 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 minimising impact on negotiations around acquisitions and as firms prepare for sale. 

Maximising return

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

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

Our approach to ESG due diligence

As both strategic partners and technical consultants, we provide comprehensive customised ESG due diligence reviews across supply chains, product stewardship, human capital, climate change, carbon emissions, waste minimisation, biodiversity impacts, water quality, fuel, and energy efficiency.

Our ESG experts 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
  • Identify regulatory liability. 

Comprehensive ESG services

With decades of multi-disciplinary due diligence and ESG experience, we can work within a firm’s specific needs to provide standalone ESG due diligence, or integrate existing firm-level ESG policies and frameworks into the ESG due diligence process to reduce investment risk.

Identifying key ESG opportunities for improvement in a target investment can provide firms with a head-start in maximising growth and performance during ownership. We provide the tools to maximise and streamline the integration and measurement of these opportunities.

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

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Connect with RPS to discuss how to integrate ESG factors into the due diligence process.

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