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We are giving you a report from a survey of Polish private equity funds (PE funds) on the impact of ESG on M&A transactions. How to build value through ESG? What are the biggest challenges PE funds face when implementing ESG strategies, and what aspects influence their adoption of an ESG approach?
Key Findings
- 91% of the PE funds believe that ESG factors will increasingly influence the course of M&A transactions.
- 95% of the surveyed PE funds that perform ESG due diligence assessments said that it had a significant impact on their transaction processes.
- 2/3 of the PE funds surveyed said they had a specific position focused on ESG management at the executive level or above.
- ESG is considered to be one of the most important aspects of portfolio company value creation by 70% of the respondents.
Whatever PE funds’ approaches to date, the majority agree on the growing importance of ESG management. PEs are constantly developing their strategies and approaches towards ESG, which can be seen from the high percentage of entities willing to change their ESG strategies within the next two years.
The biggest challenge for entities in managing their ESG strategy is the transition from ESG compliance to ESG-based value creation, as this is a difficult area to measure. Despite viewing ESG as a focal point in the M&A process, funds are struggling to include sustainability considerations in the transaction process, both in the investment and exit phases.
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What does the report contain?
The results of the survey indicate that ESG issues are not only gaining popularity but will play a key role in investment decisions in the near future. There is a growing awareness among investors of the need to consider ESG factors at all stages of the investment process. A holistic approach to sustainability is becoming increasingly important for PE funds as they recognize the long-term benefits of risk management. This trend is being driven by investors, regulatory issues and growing awareness among executives that sustainability practices translate into financial performance for companies.
From the report, you will learn about, among other things:
- Regulatory requirements affecting business;
- ESG as part of the corporate governance of private equity funds;
- ESG aspects of the investment process and supply chain;
- The importance of monitoring the supply chain and conducting ESG due diligence.
Why is the report worth reading?
We encourage you to read the report, as it provides key information that will help you properly prepare for ESG-sensitive M&A transactions. Regulations such as the Sustainable Finance Disclosure Regulation (SFDR) motivate funds to classify their operations in a way that highlights their commitment to sustainability.
The survey results indicate that:
- ESG ratings rarely affect the value of a deal, but a considerable number of private equity funds seek to build value based on ESG standards.
- Nearly half of respondents have modified the scope of a deal at least once to address the most serious sustainability issues. Another potential solution is price adjustment.
- More than half of the funds raised ESG issues during the negotiation process, but only a quarter lowered the price of their offer as a result.
Summary
Download the report on “How ESG-wise are Polish PEs?”. In the report you will find:
- Factors influencing the adoption of an ESG-sensitive approach in the M&A transaction process;
- Challenges in the process of implementing ESG strategies in PE funds;
- The importance of ESG due diligence;
- Elements of portfolio company value creation;
- Risks to portfolio companies associated with inadequate supply chain management;
- Impact of ESG regulations on M&A transactions.
This report presents the situation in 2024. From the next edition of the study, we hope to find out whether and to what extent current geopolitical changes will affect the study area.
How EY can Help
Usługi finansowe dla firm, analiza ekonomiczna i strategia inwestycyjna w EY Polska. Osiągnij sukces finansowy dzięki naszemu wsparciu i doradztwu. Dowiedz się więcej!
Read moreService Leader
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Maciej Ziomek, CFAEY-Parthenon Polska, Lider Doradztwa w sektorach Transportu i Infrastruktury oraz ESG Due Diligence, Partner
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Remigiusz ChlewickiEY-Parthenon Polska, Strategia i Transakcje, Zespół Wycen, Modelowania i Analiz Ekonomicznych, Associate Partner
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