ESG Takes Center Stage: 8 in 10 M&A Experts Prioritize Sustainability in Global Deals
ESG Due Diligence in M&A Transactions: Key Findings from the 2024 KPMG ESG Due Diligence Survey
According to the 2024 KPMG ESG Due Diligence Survey, 82% of global M&A experts consider ESG factors in transactions, with 58% believing that identifying sustainability-related risks and opportunities at the early stage of the transaction through ESG due diligence has financial value.
Financial investors are willing to acquire companies with potential for ESG innovation, even if their current ESG performance is low. In fact, 61% of financial investors said they would acquire such companies, while 59% of global M&A professionals would pay a premium for acquisition targets with high ESG maturity.
ESG due diligence has also uncovered significant issues that warrant considering whether to halt an M&A deal. 45% of global M&A professionals reported that ESG due diligence had identified such issues.
Challenges in ESG Due Diligence
Global M&A experts face several challenges in the ESG due diligence process, including:
- Selecting ESG factors within a meaningful and manageable range (49%)
- Difficulty in quantifying potential ESG factors (48%)
- Lack of accurate data and policies (45%)
Best Practices for Creating ESG Value
The report presents four best practices for creating ESG value based on interviews with 50 global M&A experts:
- Consider ESG issues when making investment decisions. For example, when investing in the construction of a new gas pipeline, evaluate not only the expected increase in natural gas demand but also ESG issues such as the contribution of natural gas to carbon emissions and the possibility of potential leaks.
- Establish comprehensive standards for ESG performance. ESG due diligence should be conducted as a standard practice prior to M&A transactions to ensure the reliability of quantitative ESG data of target companies.
- Take improvement measures based on the ESG due diligence report. Identify ESG-related risks and opportunities at all stages of the M&A transaction and implement improvement measures based on due diligence results.
- Actively utilize government funding capabilities such as tax and subsidy benefits. Utilize government incentive programs for creating ESG value, such as the EU’s Green Deal or the US Inflation Reduction Act (IRA).
Expert Insights
Kim Jin-man, Vice President of Financial Advisory at Samjeong KPMG, emphasized the importance of ESG due diligence in creating corporate value. “Going forward, domestic companies should also recognize the importance of ESG due diligence and seek ways to utilize it to create corporate value.”
Survey Methodology
The report is based on an online survey of 617 M&A experts in 35 countries and in-depth interviews with 50 investment experts. The regions represented are Europe (42%), America (39%), and Asia Pacific (19%), and the types of companies are listed companies (34%) and unlisted companies (61%). The types of investors are financial investors (44%), corporate investors (39%), and others (17%).