The case for ESG due diligence

ESG: moving beyond due diligence as a red flag exercise

Higher asset prices and more competitive bidding has driven an increase in the breadth and depth of due diligence, including ESG.

ESG due diligence on B2C assets has increased as consumers and retailers have become more concerned about ESG issues, such as consumer protection, waste and recycling, and ethical sourcing.

ESG due diligence on B2B assets has also increased as clients focus more on responsible procurement and supply chain management.

In some cases, investors are primarily concerned that assets under consideration don’t present any red flag risks. But ESG due diligence can do a lot more.

In our ESG due diligence reports, we include:

  • Sector risk and opportunity: Understanding the regulatory landscape in the sector and future trajectory of policy and regulation.
  • Asset risk and opportunity: An assessment of best practice within the asset’s sector. This includes comparison with competitors in order to benchmark the asset’s performance. We also do this exercise for other sectors that have comparable regulatory environments and ESG issues.
  • ESG due diligence questionnaire: This assessment helps identify red flags or potential risk areas, prioritised according to their materiality. It includes a business overview, indicators of governance and ESG governance processes, alongside social and environmental policies and processes.
  • Conclusions and recommendations: we frame an asset’s risks and opportunities against its ability to comply, align and lead within its sector. We ask whether it complies with laws and regulations, aligns with best practice in the sector, or is in a position to take a leadership position in its market
  • Deliverables: The outcomes of a piece of ESG due diligence include an assessment of reputational resilience, the pathway to market leadership, the ability to predict and shape the regulatory landscape and the ability to win public and private sector tenders.

To learn more about our ESG due diligence offer, get in touch with us directly at GK Strategy. 

See more articles by Isabelle Hillson