Integrating ESG strategically: Enhancing M&A value in oil and gas

In the United States, there has been a noticeable shift in tone, with rising “anti-ESG” sentiment and new laws discouraging ESG-based investment decisions. Some asset managers have scaled back public ESG commitments, reflecting political and legal pressures. However, limited partners (LPs) in private equity continue to expect ESG integration and sustainability reporting, though often with revised priorities.

In Europe and other global markets, ESG remains deeply embedded in due diligence and disclosure frameworks. Institutional investors still expect material ESG risks to be considered early in the deal lifecycle. The focus is now shifting towards the following:

• Materiality and data-driven metrics
• Streamlined reporting expectations
• Transparency and clearer ESG valuation signals

This signals a new phase for ESG: less ideological, more practical.

ESG and due diligence: More than just a checkbox

Given the technical, commercial, and financial scrutiny applied to traditional oil and gas deals, ESG is becoming another lens through which investment decisions are tested. Many acquirers are still working to integrate ESG data meaningfully into their investment strategies.

Those who assess ESG considerations early in the lifecycle are better placed for the following:

• Identifying regulatory and reputational risks
• Reducing transaction complexity and post-deal disputes
• Securing capital more easily, particularly from sustainability-linked lenders
• Benefiting from preferential W&I insurance pricing and faster underwriting

Targeted ESG due diligence is also helping reduce uncertainty in deal structuring and risk assessment, especially where climate-related liabilities or environmental performance are material to the asset class.

Regulation, risk, and valuation

Anticipating regulatory shifts, such as the EU’s Corporate Sustainability Reporting Directive, has become a key element of transaction readiness. For multi-region operators, staying aligned with ESG frameworks like the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), and Task Force on Climate-related Financial Disclosures (TCFD) helps maintain deal momentum, avoid regulatory friction during integration, build investor and regulator confidence, support valuation discussions, and reduce capital cost. Misalignment with these frameworks may lead to delays in approval or integration, increased compliance costs, and reputational damage in markets where ESG is closely watched.

Companies that build ESG into their valuation models can better identify strategic acquisitions, improve risk-adjusted returns, and support long-term value creation.

ESG also plays a growing role after the deal closes. Aligning portfolio strategy with ESG commitments allows companies to rebalance towards cleaner or lower-risk assets, reduce long-term liabilities, create new opportunities for divestment or reallocation, and reinforce sustainability narratives and stakeholder confidence. Strategic post-acquisition planning that includes ESG metrics can also assist in identifying underperforming assets or opportunities for transition-related investment.

How GHD supports ESG integration in oil and gas M&A

We support oil and gas clients in integrating ESG through the M&A process, particularly where environmental, health and safety, asset integrity, and subsurface risks intersect with broader ESG goals. Key areas of support include the following:

• Environmental and safety due diligence to identify liabilities and regulatory gaps
• Subsurface and engineering risk reviews to support lifecycle asset integrity assessments
• Community and stakeholder engagement to address social-impact concerns and regulatory expectations
• Regulatory and alignment planning to help clients anticipate ESG-related reporting and compliance requirements

We draw on our advisory experience across oil and gas, renewables, and infrastructure to reduce transaction risk and help clients build more-resilient portfolios.

ESG is no longer an optional add-on in oil and gas M&A. It is becoming a structural consideration, both in how deals are assessed and how portfolios are managed after the transaction. To support ESG-aligned M&A, dealmakers should do the following:

• Align ESG due diligence early to identify material risks and reduce uncertainty
• Align with relevant ESG frameworks to avoid regulatory missteps and strategic advantages
• Use ESG insights to guide post-deal portfolio rebalancing or divestment
• Work with advisory teams that combine technical risk understanding with ESG integration

In a changing regulatory and investment environment, incorporating ESG thoughtfully can improve resilience, access to capital, and long-term deal value.