Challenges for M&A in Developing Sustainable Finance Initiatives

Abstract

Sustainable finance integrates environmental, social, and governance (ESG) factors into investment decisions to support projects that contribute to long term prosperity and eco-friendly practices. It focuses on mitigating climate change, conserve natural resources, uphold human rights, encourage ethical business practices, promote social inclusion, ensure economic stability, and foster long-term growth. Mergers and acquisitions (M&A) are increasingly influenced by sustainable finance, as companies focus on long term increase in market share, finding new market opportunities while simultaneously achieving economies of scale. However, incorporating sustainability into M&A presents additional unique challenges, especially in developing economies. Understanding these challenges ensures that M&A transactions align with ESG principles, mitigating risks and enhancing long-term value creation. This paper explores the challenges for M&A in sustainable finance and recommendations for overcoming these challenges while also focusing on G20 initiatives for driving sustainable practices.