A Suggested Due Diligence Checklist for ESG in Fundraising Exercises
Posted in Guidance on April 26th 2023
A Suggested Due Diligence Checklist for ESG in Fundraising Exercises
Posted in Guidance on April 26th 2023
Environmental, Social, and Governance (ESG) criteria are increasingly important for investors seeking to support sustainable business practices. During fundraising exercises, thorough ESG due diligence is essential to ensure alignment with responsible values. We will outline a comprehensive due diligence checklist for ESG considerations in fundraising exercises, accompanied by brief explanations of each item.
Environmental Impact Assessment
Begin by evaluating the potential environmental impact of the business or project, taking into account factors such as resource consumption, waste generation, emissions, and pollution. Assess the company’s dedication to reducing its environmental footprint and its strategies for addressing environmental risks and challenges.
Climate Change Strategy
Review the company’s approach to climate change, which should include efforts to mitigate greenhouse gas emissions, adapt to climate change impacts, and develop or use clean and renewable energy sources.
Supply Chain Management
Investigate the company’s supply chain practices, ensuring they promote sustainability, minimize environmental harm, and adhere to ethical labor standards. Verify that the company has systems in place to effectively monitor and manage supply chain risks.
Social Responsibility
Examine the company’s social responsibility initiatives, which may encompass community engagement, philanthropy, and support for local development. Assess the company’s commitment to diversity, equity, and inclusion in its workforce and leadership.
Labor Practices and Human Rights
Ensure that the company adheres to fair labor practices and upholds human rights in its operations. This includes providing safe working conditions, offering fair wages, and preventing discrimination and harassment.
Corporate Governance
Evaluate the company’s governance structure, focusing on the effectiveness of its board of directors, transparency in decision-making, and executive compensation policies. Assess the company’s commitment to ethical conduct, including anti-corruption and anti-bribery measures.
Regulatory Compliance
Confirm that the company complies with relevant ESG-related regulations and industry standards, such as environmental permits, labor laws, and anti-discrimination regulations.
ESG Performance Metrics and Reporting
Review the company’s ESG performance metrics, ensuring they align with industry standards and best practices. Verify that the company provides transparent and accurate ESG reporting, including any voluntary disclosures or adherence to reporting frameworks such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB).
Stakeholder Engagement
Assess the company’s approach to engaging with various stakeholders, including investors, employees, customers, and local communities. Ensure that the company is responsive to stakeholder concerns and incorporates their feedback into its ESG strategies and initiatives.
ESG Integration in Business Strategy
Evaluate how the company integrates ESG considerations into its overall business strategy and decision-making processes. This includes assessing the company’s long-term sustainability goals and its plans for achieving them.
Conclusion
Performing thorough ESG due diligence during fundraising exercises is crucial for investors committed to supporting responsible and sustainable values. By following the comprehensive checklist outlined above, investors can gain a deep understanding of a company’s ESG performance and dedication to sustainable business practices. In turn, this can help investors make informed decisions that contribute to a more sustainable future.