Environmental and social due diligence: mitigating risks, identifying opportunities
Environment and social due diligence (ESDD) plays a key part of the decision-making process prior to making a new investment, as well as in long-term business success.
We’ve been at the forefront of driving and formalising the ESDD process and have seen a wide range of approaches from different fund managers.
In 2015, we commissioned an independent review of 54 due diligence reports to understand more about the process that fund managers use, and identified key themes underpinning an effective process. They include:
- when to perform ESDD and how much time to allocate;
- who to involve within the fund;
- how to define the scope of ESDD;
- what focus and priority to give to specific risks;
- what reference framework (e.g. local legislation) to use;
- assessing investee companies’ ability to deliver on an action plan; and
- how to summarise outcomes effectively in an action plan.
Our guidance is supported by case studies, practical tips and templates that fund managers can apply to their own investment pipeline.