Strategic Focus: ESG And Sustainability Due Diligence For Investors

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Executive Summary

Investors faced substantial challenges in 2023 – notably, global inflation, political instability and increased regulatory scrutiny – causing investments in many sectors to slow significantly, especially those in privately held entities. However, despite a more sluggish start than anticipated in the mergers and acquisitions (M&A) space in 2024, there is anticipation that the pace of deals will accelerate throughout the year – especially in the healthcare, manufacturing and technology sectors – thanks to declining interest rates, less rapid inflation, and growing corporate confidence in the market. At the same time, investors are placing an increasing emphasis on ESG and sustainability criteria during the investment process, including at the due diligence phase. This report provides investors with information about services and software that can help them incorporate ESG and sustainability due diligence into their existing due diligence processes and workstreams.

Table of contents

ESG and sustainability considerations are becoming more important in due diligence
Multiple factors drive investors to conduct ESG and sustainability due diligence
ESG and sustainability due diligence is a core component of the investment life cycle
Investors face challenges when conducting ESG and sustainability due diligence
Investors need external guidance on ESG and sustainability due diligence
Services firms are essential throughout the due diligence process
Software can supplement ESG and sustainability due diligence offerings

Table of figures

Figure 1. Incorporating ESG and sustainability due diligence into the investment life cycle
Figure 2. Overlap between ESG and sustainability due diligence and other diligence streams

About the authors

Jessica Pransky

Principal Analyst
Jessica is a Principal Analyst in the Verdantix ESG & Sustainability practice, which she joined in 2022. Her current research agenda covers ESG reporting and data management software, ESG solutions for investors, and risk in ESG and sustainability. Prior to joining Verdantix, Jessica worked at Ramboll, focusing on ESG risk and opportunity identification for mergers and acquisitions, as well as EHS due diligence. Jessica has previously held roles evaluating water resource allocation for a state municipality and ensuring EHS compliance for GE Aviation. She holds a BS from Tufts University and an MEng from Johns Hopkins University focused on environmental engineering, as well as an MBA from Boston University.

Kim Knickle

Research Director, ESG & Sustainability
Kimberly Knickle is Research Director of the ESG & Sustainability practice at Verdantix. Her research areas encompass ESG regulations and reporting, ESG risk, supply chain sustainability, circular economy, social impact, and sustainable finance. Kim has worked for more than 20 years in the IT industry, providing research and analysis to help companies invest wisely in new technologies. Before joining the analyst industry, she held various roles in IT services, engineering and product safety testing, beginning her career at Underwriters Laboratories, Inc. Kim holds an MBA from Boston University and a BS in Electrical Engineering from Cornell.

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