ESG Risk Assessment
Your expert for questions
Arndt Engelmann
Partner, Forensic Services at PwC Germany
Tel: +49 151 14806264
Email
An ESG risk analysis for supporting your decision-making
Sustainability is currently one of our most prominent challenges. Neglecting Environmental, Social and Governance (ESG) related aspects can result in serious consequences for companies – consequences that include reputation damage, fines and imprisonment. Keeping an eye on the ESG fraud risk is crucial, especially within the context of transactions. Here, for instance, shortcomings related to sustainability standards potentially lead to negotiations being discontinued, the transaction price being adjusted downwards at a discount, or the investment losing value after the transaction. We use a holistic risk analysis to help you identify material ESG risks and opportunities at an early stage.
Assessing the risks of ESG criteria correctly
A holistic assessment identifies both risks and opportunities
The objective of an ESG risk assessment is to identify anomalies and irregularities regarding how a company deals with relevant ESG issues at an early stage. This is based on sector-specific and company-specific know-how. Our holistic assessment method does not only take into account which internal risks and external risks exist. It is also about looking at material ESG opportunities as an integral part of a company's long-term economic success – in terms of the target company's strategy, business model, distribution, and supply chain. Accordingly, the risk analysis also includes the company's surrounding environment and relationships with business partners.
Avoiding damage, thanks to an integrity risk analysis
We conduct integrity assessments for the relevant stakeholders. This is done with the goal of avoiding negative impacts such as reputation-related damage. To analyse integrity risks, we first screen through general information concerning the target company, such as available media and press reports. We then identify key persons and shareholders, up to the level of the beneficial owner and include them in the research. For this purpose, we use worldwide access to relevant information databases, such as sanctions lists, commercial register, court and media databases.
How we support you with the ESG risk analysis
- ESG Risk Assessment
- ESG Integrity Assessment
- ESG Materiality Analysis
- ESG Due Diligence
ESG Risk Assessment
With our holistic approach, we support you in identifying all material risks and opportunities related to ESG topics. The analysis provides you with a clear picture of how the company under review is positioned with regard to sustainability issues, the maturity level of certain ESG criteria, and which measures and initiatives make sense as next steps.
ESG Integrity Assessment
With an independent integrity assessment, we examine in detail whether and which integrity risks arise from a company and its representatives. To achieve this, we identify all relevant key persons for the target company and use global access to databases for extensive research.
ESG Materiality Analysis
Materiality analysis is an established method for identifying relevant sustainability issues. It includes an analysis of the company, its environment and the stakeholders' expectations. Based on the materiality analysis, we help you identify relevant fields of action by defining KPIs, strategic goals and measures for them.
ESG Due Diligence
We support you in the assessment of ESG criteria along the entire transaction life cycle. For instance, for private equity houses and corporates, we examine the target company with a risk and integrity analysis prior to acquisition. We support private equity houses and corporates in integrating companies into their portfolio or into the Group as well as in preparing the exit or divestiture, respectively.
ESG risk analysis as a foundation for implementing measures
The findings of the ESG risk analysis are usually summarised in a so-called ESG Red Flag Report. This points out the risks of fraud in connection with ESG criteria. Based on the results, the next step is to implement preventive measures and initiatives that are aimed at, for instance, enhancing reputation.
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