Environmental, Social & Governance Due Diligence (ESGDD)

An ESGDD is a process of assessing the potential environmental risks, social risks and impacts associated with a company, project, investment, or business transaction. The ESGDD evaluates the environmental and social performance and recommends appropriate mitigation measures and corrective actions required to mitigate risks and ensure compliance with relevant legislation and adherence to international best practices.

It considers factors such as environmental sustainability, community relations, labour practices, human rights, and other social aspects to ensure compliance with regulations, identify potential liabilities and make informed decisions about the investment's viability and potential impacts. It is also important to ensure there are no Fatal Flaws or Condition Precedent findings which could restrict or risk the potential sale or acquisition of a target.

When making investment decisions, many institutional investors evaluate whether any environmental (e.g., contaminated land), social (e.g., health, safety & human rights issues) and governance (e.g., bribery and corruption) issues could result in reputational, operational, and strategic risks.

There has been a shift away from risk and compliance-focused Environmental, Health and Safety (EHS) assessments in the investment life cycle, to a more holistic Environmental, Social and Governance (ESG) due diligence assessment which better identifies the sustainability risks and opportunities. Deloitte provides a tailored approach across the various phases of ESG management and the associated activities.

Our ESGDD is guided by reference frameworks and a legal review
The International Finance Corporation (IFC) applies the Performance Standards (PS) for Environmental and Social Sustainability (E&SS). PS are put in place to manage the risks and impacts associated with investment organisations in applying E&SS risk assessment methodologies and principles to their investments.

The World Bank Group (WBG) EHS Guidelines are technical reference documents with general and industry-specific guidelines for implementing the IFC PS and complying with good international industry practice. These EHS Guidelines are designed to be used together with the relevant Industry Sector EHS Guidelines which guides users on EHS issues in specific industry sectors. The EHS Guidelines contain the performance levels and measures that are generally considered to be achievable in new facilities by existing technology at reasonable costs.

The Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. They provide non-binding principles and standards for responsible business conduct in a global context consistent with applicable laws and internationally recognised standards.

Our legal review investigates relevant country-specific Environmental and Social Sustainability legislation covering but not limited to Environmental Management, Conservation, Water Quality, Air Quality, Labour Relations, Basic Conditions of Employment, Occupational Health & Safety and many more aspects which are considered to ensure that all legal risks are accounted for.
 
At Deloitte, we have a team of subject matter experts with vast experience in ESGDD who will apply these well-known best practice frameworks to their ESGDD assessments to provide their clients with a world-class ESGDD outcome report.