PwC Poll Shows Increasing Focus on Sustainability Factors in Dealmaking Nearly 70% of respondents plan to evaluate environmental, social & governance factors in their future transactions
NEW YORK, Nov. 13, 2013 /PRNewswire/ -- Environmental, social and governance (ESG) matters are becoming increasingly important in the deal market, according to a recent poll of over 300 professionals conducted by PwC US. The poll, conducted during PwC's recent webcast, Integrating environmental, social and governance (ESG) issues in deals and valuing their impact, found that 68 percent of participants who are planning a divestiture, acquisition, merger or IPO in the next 12 months plan to evaluate ESG considerations when planning their transactions.
Investors are increasingly taking environmental, social and governance factors into consideration when assessing the value of a company. According to the survey, 38 percent noted that investors are the stakeholder group most focused on ESG issues, closely followed by senior management at 36 percent. Other stakeholders expected to be focused on ESG issues include boards (19 percent) and bankers (seven percent).
"Several key issues are making ESG initiatives more pertinent to companies including the rising price of natural resources, urbanization, global climate events, as well as expansion into emerging markets, said Scott Gehsmann, a partner in PwC's U.S. Deals practice. "Environmental obligations, regulatory & compliance requirements and how ESG strategies impact customers have accounting and reporting implications and can impact deal value."
The goals behind an ESG program vary according to an organization's priorities and desired outcomes. When asked to identify the leading areas of ESG focus in their own organizations, poll participants cited several factors. 27 percent said that regulatory compliance & risk management is their primary focus.
Fifty percent said they are focused on three areas: regulatory compliance and risk management; operational efficiency and effectiveness; and revenue enhancement and other market-facing initiatives. This is evidence that a growing number of business executives are expecting more from their ESG initiatives.
"We find that most companies begin their initial ESG programs to focus only on risk and liability assessments. However, savvier companies understand ESG expands beyond risk and they are using ESG to capture key strategic, operational, reputational and financial benefits, " said Lauren Kelley Koopman, a director in PwC's U.S. Sustainable Business Solutions practice. "We're working with companies across the full spectrum of ESG - identifying the risks, cost savings opportunities, tax incentives, and generating new revenue."
PwC's poll also asked executives to identify barriers to placing a dollar value on their ESG initiatives. Nearly half (46 percent) responded that they are facing three barriers, cited as a lack of in-house expertise, lack of methodology, and lack of senior level support.
"A company's ESG strategy, or lack thereof, can have direct and indirect impacts on value, positive or negative. In the deal context, it can be important to identify and measure those ESG factors, whether risks or benefits, that have the most potential impact on value and ROI so that they can then be built into pricing decisions. Identifying risks or benefits that others miss can make the difference in winning an auction or earning the planned ROI for a deal," said Donna Coallier, a partner in PwC's Valuation practice.
To view the recording of the webcast, visit: http://www.pwc.com/us/en/cfodirect/events/webcasts/deals-environmental-social-governance-issues-october-22-2013.jhtml.
PwC's Sustainable Business Solutions professionals help organizations create competitive advantage through sustainability. We understand our clients' industries and unique business challenges, and we help them meet transformational challenges across the enterprise: building risk resilience into business models and value chains; improving efficiency and returns on sustainability investments; and capitalizing on innovation and growth opportunities.
Visit us at www.pwc.com/us/sustainability to learn more.
PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution. We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual. Our local and global deal strength is derived from our deal professionals in 35 cities in the U.S. and across a global network of firms in 75 countries. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S. For more information, visit www.pwc.com/us/deals.
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