Environmental, Social, and Governance (ESG) performance is increasingly becoming a critical factor in the Mergers and Acquisitions (M&A) landscape, particularly for Small and Medium-sized Enterprises (SMEs).
Good ESG performance can significantly impact a company’s value. It can enhance their reputation, financial performance, market value, and access to equity financing. A recent survey found that over 90% of millennial investors were interested in sustainable investing, indicating the growing importance of ESG investing.
However, ESG performance also presents challenges. ‘Greenwashing’ – or making overblown claims relating to environmental achievements – is something to look out for. Therefore, a robust and fact-based view of ESG performance should be developed early in the transaction process.
In the growing regulatory framework, acquirers, targets, and investors should properly account for ESG in mergers and acquisitions. Two-thirds of interviewees said that poor performance on ESG factors had prevented a deal or affected their willingness to do a deal. On the other hand, good performance on ESG factors can increase motivation to do a deal.
In conclusion, good ESG performance can be a significant advantage for SMEs in M&A, presenting both opportunities and challenges. As the importance of ESG continues to grow, it is set to become a key consideration in M&A transactions.
Step-By-Step ESG can help you identify relevant ESG risk and opportunity factors that will strongly support future M&A aspirations and increase shareholder value.
Contact us at info@sustainabilitysciences.com.