In an increasingly complex and regulated world, where sustainability issues present both risks and opportunities, transactional environmental due diligence (EDD) needs a deal-specific approach that addresses both conventional compliance and legacy liabilities, as well as sustainability performance and preparedness for the future.
The Anthesis Global Transaction and Corporate Advisory practice incorporates this approach into its services. This practice covers the full spectrum of property, land and business assets, whether they be single site property assessments or multi-country appraisals of complex manufacturing and trading entities and their supply chains.
We complement traditional EDD assessments with tailored and focused Environment, Social and Governance (ESG) reviews, and in-depth issue-specific assessments using our innovative diagnostic benchmarking and analytical tool Risk Horizon™ during the initial phase of the EDD process.
Harnessing the power of “big data”, Risk Horizon™ can quickly assess unique and verifiable sustainability databases to model deal-specific risk and opportunity scenarios. The results of the screening help to focus the due diligence process on the most significant risks to reputation and sustainable operation. Risk Horizon™ not only expedites the definition of the range of issues to be considered at the earliest stages of a transaction, but is supported by in-house capabilities to cover a broad spectrum of contemporary EDD considerations.
Our services are delivered by a global team of recognized EDD professionals drawing on many years of merger and acquisition (M&A) and EDD experience, supported by in-depth knowledge of ESG issues. Services include:
- Desktop studies and data room reviews
- Phase I EDD & Technical Due Diligence Assessments
- Further quantification of risks and liabilities e.g. Phase II subsurface investigations, building contaminants surveys, radon risk assessment and mitigation recommendations
- Comprehensive EHS compliance and conformance assessments
- ESG reviews, gap analysis, benchmarking and opportunity identification
- Strategic advice during negotiations and facilitation of post-acquisition process
- Permitting and regulatory authority management
- Design and management of complete EHS programs to facilitate business divesture plans, including identification and rectification of liability issues prior to disclosure and sale
The nature of due diligence is changing
While traditional compliance and legacy related liabilities still need to be identified and assessed, an increasing number of transactions are exposed to new and material risks that are not currently considered by the traditional EDD approach. Such risks include climate change adaptation; water scarcity; supply chain security and reputational issues; human rights and social impacts.
The need to incorporate ESG issues into transactional due diligence, as well as the possible risks and liabilities, is leading to a rise in the untapped potential for value creation associated with improved sustainability performance (e.g. accessing new market opportunities; cost savings; additional revenue streams). Early identification and screening of supply chains, energy management (e.g. buying better, using less and self-generating) and waste (e.g. converting waste to an asset) is transforming the scope of EDD assessments. Increasingly now, all parties involved in transactions recognize they should identify, model and quantify these risks as a core part of their investment analysis, alongside financial metrics.
At Anthesis we have recognized that the traditional EDD approach can often overlook these new and emerging issues and consequently does not always support the pre-deal, post deal and exit phases sufficiently. A new approach is needed, and we have responded by developing a range of bespoke tools to screen, evaluate and manage ESG related risks as part of the transaction and ownership lifecycle.
RiskHorizon™, created by Anthesis, is a purpose made tool for use in the EDD process. It is specifically aimed at helping legal advisors, investors, acquirers, finance professionals and deal makers identify the material ESG risks and opportunities at an early stage of the deal cycle and take full account of the relevant issues throughout the transaction lifecycle. RiskHorizon™ links early screening across a range of legacy and future risks scenarios to model the risk and opportunity landscape in the transaction, so that they can be subsequently evaluated. RiskHorizon™ output is displayed in a dashboard, which allows the relevant party we are acting for to:
- Quickly screen the commercial and financial implications of sustainability factors in any investment process (Acquisitions, IPOs, VC and PE investment)
- Reduce transaction costs and time by early identification of potential red flag issues
- Identify outperformance opportunities, to bring identified positive cash flows quicker than anticipated
- Environmental Impact Assessment (EIA)
- Environment & Social Impact Assessment (ESIA)
- Strategic Environmental Assessment (SEA)
- Site selection and feasibility studies
- Opportunities and constraints analysis
- Environmental management and monitoring plans
- Environmental monitoring and audits