ESG Due Diligence and Climate compliance in M&A transactions

The regulator and also courts are tightening the ESG screw. Recent examples: On 26 May 2021, the Dutch Rechtbank Den Haag in a decision – although not yet final – obliged Royal Dutch Shell to reduce its CO2 emissions by 45 percent by 2030 compared to 2019. In a decision of 03 June 2021, the European Court of Justice (ECJ) held that the Federal Republic of Germany had failed to fulfil requirements under Directive 2008/50/EC of the European Parliament and of the Council of 21 May 2008 on ambient air quality and cleaner air for Europe by failing for many years to take sufficiently effective action against exceedances of limit values for the air pollutant nitrogen dioxide (Case C-635/18). Switzerland introduced strict due diligence and transparency obligations in the Swiss Code of Obligations and the Criminal Code: Mandatory non-financial report (ESG/CSR report), reporting and due diligence obligations for supply chains regarding conflict materials and regarding child labor. The pressure on companies in this field has increased significantly – from the government, but also from NGOs and the media (reputational risks). ESG criteria are also being incorporated into company valuations (ESG rating). Dealing with ESG issues is increasingly becoming a value determining factor for companies.

This increases ESG risks in corporate acquisitions. The wise buyer not only examines the past (ESG legacy), but also identifies whether investments will be necessary in the future (ESG investment backlog).

The ESG team and our network partners in the field of ESG will be happy to support you in checking ESG aspects in due diligence (ESG DD).

July 2021 | Author: Dr. Martin Eckert

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