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- Investor Focus: 71% of investors prioritize ESG due diligence in transactions, with 58% citing its monetary value.
- ESG Premium: 60% of ASPAC investors are willing to pay a premium for targets with high ESG maturity.
- Challenges & Solutions: Investors face challenges in scope selection, data quality, and financial translation, but are increasingly integrating ESG into their strategies.
ESG Due Diligence Rising in Priority
ESG due diligence is becoming a critical priority for Australian dealmakers, mirroring global trends. According to KPMG’s ESG due diligence study, 71% of investors have increased the importance of ESG in their transactions over the last 12 to 18 months.
Monetary Value of ESG
Despite economic and geopolitical challenges, 58% of investors globally view ESG due diligence as a key to unlocking monetary value in investments. In the ASPAC region, 60% of investors are willing to pay a premium—up to 10% more—for companies demonstrating high ESG maturity. Mature investors link their ESG due diligence directly to their strategy, using findings to inform post-closing plans.
Australian ESG Landscape
In Australia, decarbonisation and climate risk dominate ESG conversations. With mandatory climate reporting on the horizon, companies are striving to achieve regulatory compliance. Investors are also focusing on climate risks, modern slavery, human rights, and labor practices, assessing financial impacts of non-compliance.
Value Creation Opportunities
Mature dealmakers are increasingly focused on value-driven transformation. They are looking at how well potential targets can navigate the low-carbon transition and capitalize on Australia’s natural advantages, such as its abundant sunshine, to enhance competitiveness in the renewable energy sector. Products with strong ESG credentials can command premium prices, further driving interest.
Seeking Value, Not Values
The complexity of ESG topics presents challenges for investors. They struggle with defining a manageable scope, obtaining quality data, and translating findings into financial terms. KPMG professionals assist by focusing on the financial value of ESG due diligence, using global methodologies to streamline the process and target value creation.
Future Growth in ESG Due Diligence
As Australia prepares for new ESG-related reporting frameworks, starting with climate disclosures in 2025, the adoption and maturity of ESG due diligence are expected to grow across all investment stages and market segments.
Related Article: KPMG Launches Clear On Climate Reporting Hub
Global ESG Due Diligence Study 2024
KPMG’s global study captures insights from over 600 dealmakers in 35 geographies. The study highlights best practices for leveraging ESG due diligence to unlock value creation opportunities.