Financial institutions that invest in a company often undertake an ESDD review to ascertain the potential financial, legal and/or reputational risks associated with the investment.
It is in the interest of the investee company to ensure that they are aligned with the requirements of financial institutions, in order to improve the investment terms and the companyโs overall attractiveness to investors.
Key standards, frameworks and guidelines (the โApplicable Standardsโ as defined within the Equator Principles, a key framework used by financial institutions) can include:
While financial institutions may undertake an ESDD with their internal ESG team, often a third-party consultancy is requested to undertake the ESDD in order to have an impartial expert opinion.
At minimum, an ESDD comprises a desktop review of available documents and publicly available information, and may also include a site visit to verify facts on the ground.
Key issues investors are most concerned with include:ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย