Is Environmental Risk Now the Most Critical Factor in Modern Due Diligence?

Traditionally, financial and legal due diligence were seen as the most critical aspects of an M&A transaction. However, with increasing regulatory scrutiny and ESG considerations, environmental risks appear to be taking a more central role in deal evaluation.

In industries such as oil and gas, environmental liabilities can directly affect valuation, delay transactions, and even result in long-term obligations that extend beyond the acquisition itself. These risks are often not immediately visible in financial statements, but can significantly impact future cash flows and operational flexibility.

This raises an important question: has environmental due diligence now become as important than traditional financial and legal due diligence in certain industries?