{"id":7000,"date":"2022-04-08T06:42:58","date_gmt":"2022-04-08T14:42:58","guid":{"rendered":"https:\/\/solarpowerinvestor.com\/?p=7000"},"modified":"2022-04-19T10:51:23","modified_gmt":"2022-04-19T18:51:23","slug":"esg-has-become-a-primary-area-of-focus-in-ma","status":"publish","type":"post","link":"https:\/\/solarpowerinvestor.com\/esg-has-become-a-primary-area-of-focus-in-ma\/","title":{"rendered":"ESG Has Become a Primary Area of Focus in M&A"},"content":{"rendered":"\n
Deal making had a rough year in 2020. The global pandemic shook economies around the world and made it harder for M&A transactions to occur with the lack of social interaction. As the tides turned, and society had widespread vaccine distribution, businesses wanted to pivot into a new direction. 2021 included a record-breaking year in deals which included many megadeals. Spinning out from the pandemic, the biggest trend in M&A was healthcare, followed by the megatrend in technology, and finally financial services. <\/p>\n\n\n\n
Before the pandemic, deal-makers considered ESG factors in their deals, but they did not find it to be important. That is because there is no standard framework to disclose ESG factors. Another issue is that ESG rating is only based on the values that the company puts forward. A company can only talk about their impact on climate change, but will have a bad score because they did not state their overall values. This leads to greenwashing, where a company markets themselves as an ESG focused company, but does not take any initiatives. <\/p>\n\n\n\n
Savvy investors aren’t the only one taking notice, the SEC is looking to build a standard framework for regulation to give a better understanding for company\u2019s how to disclose their ESG factors.<\/p>\n\n\n\n
Covid-19 was what some say a \u2018black elephant\u2019 event, which is a mix between a black swan event that was lurking over society like an elephant in a room. Global society showed its resilience in order to recover from the pandemic and deals were made to better improve our health-care system. Climate change has been a macrotrend that has been glooming over society\u2019s head for quite some time now. <\/p>\n\n\n\n
After showing great resilience through the pandemic, it is time to take action to prevent another \u2018black elephant\u2019 event where Earth\u2019s atmospheric temperature is consistently rising by 2 degrees year-over-year. ESG deals have doubled since the pandemic which is the tailwind of a megatrend that is only just beginning. <\/p>\n\n\n\n
Executives have already started to see returns from their deals with ESG focused companies. This is what Julie Haeflinger <\/a>from Baker Tilly had to say about ESG focus in M&A, <\/p>\n\n\n\n \u201cNot only are dealmakers focusing on ESG in record levels, but daylight is emerging in the returns of a target with a strong ESG record and one with only mediocre performance. Investors report that ESG investment strategies deliver improved returns and dealmakers say investor pressure is growing. In an increasingly competitive landscape, smart dealmakers are using ESG as a lever to build value and expedite returns.\u201d <\/p>Julie Haeflinger<\/a>, Corporate Finance lead, Baker Tilly<\/a><\/cite><\/blockquote>\n\n\n\n This is evidence that ESG factors in a company can help build or destroy value. Companies who take initiatives to change their values to focus on climate change and diversity within their workforce, will impose less risk for investors. This in itself will drive demand in deals that are focused on ESG.Regulators and policymakers have already begun to incentivize deals that are focused on ESG. <\/p>\n\n\n\n