Temperature’s Rising: The growing importance of ESG to EMEA M&A

Report 11 August

Temperature’s Rising: The growing importance of ESG to EMEA M&A

ESG’s importance may have accelerated greatly in recent years, but it is no passing fad

Temperature’s Rising: The growing importance of ESG to EMEA M&A, in association with Intralinks, features a survey of 150 senior leaders working in roles related to M&A and alternative investments to understand their thinking as it relates to ESG and how this shapes their dealmaking.

Key findings include:

ESG is a hot issue: ESG’s importance may have accelerated greatly in recent years, but it is no passing fad. Over three-quarters (76 percent) of those polled in our survey say that the importance of ESG in their organization has increased in the past 12 months and a similar proportion (73 percent) believe that it will increase further in the coming 12 months.
Regional variations remain within Europe: There is huge variation within Europe when it comes to ESG. Germany has proven to be a leader in most aspects of ESG — for example, three quarters of respondents based there say their most recent acquisition was driven by ESG. On the other end of the spectrum, respondents in Iberia were consistently behind in ESG adoption.
Less than half of dealmakers are conducting ESG due diligence on target supply chains: Although a significant number of those polled (46 percent) have undertaken ESG due diligence on a target’s supply chain, this is still less than half of respondents. This opens bidders up to potential risk. Private equity (PE) and other financial sponsors are ahead on this issue, with 65 percent saying they conduct ESG due diligence on supply chains compared to only 27 percent of corporates.
Room for improvement in ESG due diligence data: Even though ESG has risen up the agenda for M&A practitioners in Europe, there is still room for improvement in terms of the availability and quality of data available. Only 16 percent of respondents say the quality and comprehensiveness of ESG due diligence data available to them in their last deal was “very good,” with 30 percent merely deeming it “acceptable” and a further 19 percent who say it was "poor" or "very poor."
Proposed EC regulation has support despite burdensome compliance: The proposed Directive on Corporate Sustainability Due Diligence enjoys support from over half of the respondents (59 percent), with only a minority who say they are not in favor (20 percent). Despite this support, 21 percent of respondents say they view the proposed directive as “not very burdensome,” with 63 percent saying they view it as “somewhat burdensome” and another 16 percent view it as “very burdensome.”