The business performance and reputation of companies and financial institutions are increasingly impacted by environmental, social and governance factors.
Today, conduct in relation to ESG matters determines the long-term success of a business. It is increasingly widely accepted that companies need to be compliant in ESG factors and consider multiple stakeholders in order to ensure that they operate a responsible and sustainable business. Issues such as human rights violation, environmental pollution, or unethical business conduct represent a serious financial and reputational risk; in addition, respect for ESG matters is becoming mandatory in many jurisdictions.
We support our clients in managing reputational risks derived from ESG factors, in compliance with national and international regulations as well as non-regulated ESG-related expectations. Our ESG due diligence is used in the phase of pre-qualification of a supplier, as a risk mapping tool in the supply chain or before a possible acquisition or partnership.
Our ESG due diligence is risk-based and is conducted considering industry-specific and target-specific factors. We believe that ESG matters are interconnected and use a holistic approach to identify and assess the related risks.
As far as the environmental aspect is concerned, our ESG Due Diligence includes analysis of the business conduct in relation to internal policies, management of relevant environmental aspects and interaction with key environmental stakeholders. The social dimension covers policies and responsibilities concerning human rights; labour standards; diversity; equality; and health and safety, while analysis of corporate business conduct; ethics; transparency of the management and ownership; anti-corruption and anti-money laundering practices are part of the governance aspect.
A producer of renewable energry was considering an investment by a US-based fund but there were indications that the fund had interests in the fossil fuel sector, which was in contrast with its mission statement to be operating only in the renewable energy sector.
A systematic analysis and on-the-ground enquiries revealed that the fund had investments in several jurisdictions through various investments vehicles. It emerged that the, through complex corporate chains, the fund held interests in companies involved in the oil business, some of which were involved in environmental issues. In addition, our investigation revealed that one of fund’s directors had close ties with the hydrocarbon lobby active in the US Congress in Washington.
The client concluded that the evidence of ESG violations was such to affect large part of the funds and decided not to engage further with the investor.
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