Lawyers need to keep companies’ evolving priorities for environmental, social and corporate governance (ESG) initiatives in mind to best help clients achieve ESG objectives while still getting deals done, McGuireWoods Charlottesville partner Clare Lewis and associate PJ Harris wrote for the spring 2023 edition of Deal Points, the newsletter of the American Bar Association’s Mergers and Acquisitions Committee.
In their article, “ESG Considerations in the Context of M&A,” Lewis and Harris explained that ESG considerations for M&A can come from the top down — such as public policy or investment focused on ESG metrics — or the bottom up, through consumer demand to address these issues.
Companies that fail to address these concerns may become less attractive targets as investment firms increasingly add diversity, equity and inclusion metrics to their investment criteria, and buyers must conduct thorough due diligence in deals to obviate ESG risk factors, the attorneys cautioned.
“The way a company should approach ESG issues is rarely prescriptive and there is a vast array of legal considerations that potentially come under the ‘ESG tent,’ ” the attorneys wrote. “Therefore, it is critical for deal lawyers to think through how these disparate ESG elements can positively or negatively impact both individual deals on the one end, and the deal environment at large on the other, and counsel clients accordingly.”