The challenge

Understanding the environmental, social and governance risks and opportunities of an investment

As an impact fund, the client is committed to making responsible and ethical investments, through assessing potential targets against key ESG and Impact thematics, including workplace health and safety, human rights and modern slavery, nature and biodiversity, climate change, community and stakeholder impact, waste and more. As such, Rennie was been engaged by the impact fund to undertake ESG due diligence assessments to support multiple transaction responsible decision making.

Our solution

Assessing targets for key ESG risks, opportunities and red flags

Rennie assesses a target company against the client’s ESG and Responsible Investment requirements and key relevant ESG thematics using an agreed upon assessment framework using an Issues Tree method. The assessment typically involves a desktop review of information in the dataroom and assessment of publicly available/peer information. Rennie also holds sessions with the target company’s management to further assess ESG risk and maturity. This also often involves site visits and further follow up deep dive verification and due diligence.

Our impact

Deep technical expertise across a range of ESG topic areas, including climate risk, GHG exposures, nature and biodiversity risks, health and safety, first nations, modern slavery.

Meaningful sessions with the target’s management that allow for positive relationship building, insight into the current state maturity and capability of the organisation in proactively managing and mitigating ESG risks, and leveraging opportunities for value creation.

To support responsible and effective decision making, development of Initial Red Flags and Detailed ESG Due Diligence reports that summarise the target’s ESG readiness, risks and opportunities against a pre-defined ESG framework. This also includes recommended actions for further deep dive verification or consideration for uplift post transaction completion. These are to close identified gaps, minimise risk exposures, leverage value creation opportunities and achieve desired level of maturity in alignment with the client’s ESG/Impact mandate and strategy.

Key insights

• Structured issues trees are useful in scoping out the key areas of focus and pre-defining testing criteria for a due diligence engagement aligned with the investor’s thematics, policies and sector relevant issues
• Aligning on assessment criteria upfront for material risks and level of maturity helps to shape recommendations for 100, 200 and longer-term planning/uplift.
• Access to information/data is often challenging for smaller organisations that do not have formalised management system documentation, so a balance of stakeholder engagement, peer assessment and site observations is invaluable to identify fit for purpose recommendations