Green Gold

Acknowledgements xiii

Introduction xv

Why We Wrote This Book and Why You Should Read It xv

About the Authors xix

Chapter 1 Defining Terms and Exploring the Sustainability/ Financial Value Link 1

A Brief History of Sustainability 2

The Link with Financial Value 19

Does the ESG Pushback Impact Financial Value? 35

References 39

Chapter 2 ESG and Regulation – The Hidden Value of Rules 43

The History of Sustainability Regulation 43

The International Sustainability Standards Board (ISSB) 49

ESG Ratings and Their Relationship to Regulation 56

Regulatory Rollback, the Real Impact 61

Unintended Consequences 64

References 66

Chapter 3 Capital Flows – How ESG Drives Deals That Create Value 67

What Do Deals Tell Us About the Financial Value of ESG? 67

How Deals Address the Plastics Problem and Create Value 81

Customer Sentiment and the Key to Sustainable Success 94

References 104

Chapter 4 Establishing the Link Between ESG Performance and Financial Value 107

The Cost of Capital – What’s ESG Got to Do with It? 107

Establishing the Link Between ESG Ratings and Price Multiples 117

The ESG ‘Value Bridge’ – Taking a More Granular Approach 131

References 141

Chapter 5 ESG Due Diligence and the Private Equity Playbook 143

What is ESG Due Diligence? An Overview 143

Three Approaches Towards ESG Due Diligence in Transactions 148

The Private Equity Approach to ESG Due Diligence 148

A Bias Towards Compliance 166

Applying the Private Equity Playbook 171

References 177

Chapter 6 When ESG Goes Wrong (And How to Put It Right) 179

The Rise and Fall of Boohoo 179

The Palm Oil Story 187

Key Deal Rationales 194

References 196

Chapter 7 Financial Value of ESG in Transactions: Lessons Learned and How to Apply Them 199

Key Takeaways for Investors 202

Key Points for the ESG Universe 205

Appendix 1 Materiality, Maturity and Sample Private Equity ESG Due Diligence 207

Appendix 2 Comparison of Three Global Private Equity Firms on How They Approach ESG in Their Own Firms 215

Index 221