Even with uncertainty in financial markets and the global economy, the importance of ESG due diligence remains unchanged. The systematic evaluation of a company’s non-financial performance in the form of environmental, social and governance (ESG) risks and opportunities are critical considerations for investors and other stakeholders involved in corporate transactions.
Assessing a target company’s ESG profile during a transaction is more important than ever. Global supply chains are being re-shaped in real time, geopolitical uncertainty continues, and more extreme weather events can have significant consequences and financial impacts for businesses worldwide.
Studies have shown that those organizations that integrated ESG factors into business strategies were more equipped to face the crisis compared to those who didn’t. There is a strong correlation showing that the companies that prioritize ESG practices and mitigate associated risks are likely to be far more resilient in the face of challenges posed by ever-changing global markets, regardless of what is driving them.
The Evolving Role of ESG in Transactions
ESG considerations have seen a sharp rise in prominence within traditional due diligence processes over the past five years — with 71% of global dealmakers reporting that ESG has become significantly more important in transactions within just the last 12 to 18 months This can be attributed to several factors, including the rise in sustainability related regulations and reporting obligations across sectors and jurisdictions, as well as the growing recognition of global challenges such as climate change and forced labor in supply chains, both of which pose long-term risks to business stability and financial performance.
As sustainability considerations have moved into the mainstream, both private and public entities have significantly expanded their ESG disclosures. Nearly 99% of S&P 500 companies now publish sustainability information (up from 90% in 2019), and the median length of environmental and social disclosures in annual reports has grown more than sixfold since 2001. There is now more publicly available ESG data and information than ever before, which in turn raises additional potential issues for investors to navigate such as data quality and greenwashing concerns.
The Value of an ESG Pre-Screen
Understanding and analyzing this data in order to provide actionable insights is both challenging and time consuming and requires expert analysis. The identification of potentially material ESG issues linked to financial impacts, regulatory non-compliance and reputational risk are generally considered to be red flag issues. Surfacing these at the earliest possible stage of the due diligence process can help improve the efficiency of the engagement, allowing focus on those identified areas of concern, help to reduce uncertainties or unknowns about a target and provide valuable context surrounding the target’s industry and operating footprint in association with evolving regulations and reporting requirements.
Next Steps: TRC’s InitatESG
TRC’s practitioners experienced in ESG due diligence and broader environmental, health, safety and sustainability (EHS&S) services provide flexible options for clients that require a more refined approach or who may be hesitant to request full-scale due diligence due to time and budget constraints. We developed a focused and standardized pre-screen approach which can support any size of deal and complexity.
To meet the needs of clients operating under tight timelines or limited budgets, our team developed InitiatESG, a streamlined ESG pre-screening solution designed to flag key ESG risks quickly and cost-effectively—without the commitment of a full diligence engagement.
InitiatESG offers:
- A concise ESG screening report in 3–5 days
- Sector-specific red flag identification
- Reputational and regulatory exposure checks
- Key findings and next-step recommendations
- A live walkthrough with ESG experts
No site visits. No document requests. No management interviews. Just a high-impact scan to inform decision-making fast during a transaction.
Part of a Broader Suite of ESG Due Diligence Services
InitiatESG is part of TRC’s ESG Due Diligence Essentials Suite, which also includes:
- AnalyzESG: A full ESG due diligence product, including document reviews, facility-level assessments, and management interviews for a comprehensive risk profile.
- AnalyzESG+C: Adds assessment of physical and transition climate-related risks to the AnalyzESG framework, aligned with leading climate disclosure standards.
