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Phil: And thanks everybody for coming and making the time today. I'm going to read a little something for context to kind of get us started and then jump into the first question. So. Think about this. Environmental due diligence for corporates, financials, and investment organizations is undergoing several significant changes.
There's a general shift from using the Phase 1 ASTM standards to ESG and EHS assessments to identify transition risks. There's also a need for multidisciplinary type approach and experienced due diligence practitioners that understand the M& A landscape, the critical risks of the M& A transaction, and that can tailor the DD work accordingly to meet the M& A.
Typically fast paced deal timelines. So thinking about this as a, as a way to kind of start setting our context about our conversation today. I'd like to ask each one of you the same question and I'll start with Ida. In your region and in your area of expertise, what do you see as some of the main drivers of current [00:01:00] trends?
Eeda: Thank you, Phil. That's a really good question. So, I sit here in Singapore, and I cover over a variety of different project activities across ASEAN and the larger APAC region. Within M& A, within investments, especially here in Asia, there's been an increased focus on ESG, because Most of the money coming in is foreign capital investment, and it comes with a higher standard or expectation for ESG compared to some of the local regulations.
So there's a lot of conversation and risk identification and risk management around what is the local context mean in Asia to the deal compared to a Western or foreign perspective. And it involves a lot of back and forth conversations. Training and education, really, in terms of what does risk actually mean in Asia compared to other parts of the world.
Phil: Well, I'm really glad you said that because it strikes on common themes [00:02:00] that we hear a lot. , in the podcast, in the conversations we're having with folks from Integin Alliance, that there are, there is global goals, but local translations of what those things mean.
And we're going to get into a lot of detail of EHS versus ESG later on in the conversation. So I'm going to shift and ask the same question to Matthew. How you doing, Matthew?
Matthew: Good, good. Thank you. Thank you for having me. Yeah, I'll compare myself a bit to what Eda just said. Clearly, you know, in the last four or five years, environmental, social, and governance has crept into the arena. I'll say in terms of due diligence but it's really you know, the scope of any due diligence program is driven by the stakeholders at the end of the day.
And the stakeholders vary from region to region, from deal to deal, and client to client, so it can be quite different. From a U. S. perspective, ESG clearly plays a role, but to a much lesser extent,
Driven primarily [00:03:00] by the limited partners, say, in a, in a private equity situation, or by public pressure or, or customer experiences with strategic buyers in the case of EDA.
I would suggest that the ESG is driven by the financing entities. In that case, that's the stakeholder difference between the US centric financing folks and what's being driven in other areas of the world. So, ESG is clearly part of what we do, but not to the extent that it's looked at in Europe and Asia.
In fact, I would even suggest that it's, it's been called a dirty word on Wall Street because there has been some pushback in the U. S. against a lot of the environmental, social, and governance policies and regulations that are coming out. But the stakeholders are still demanding it, in some regards, so it still plays a role, but in a more forceful way.
Graham: to pass that
Phil: Do you see the shift, Matthew, that we talked about at the top of Phase 1 [00:04:00] ASTM standards to ESG assessments, or is it, is there a general pushback on regulatory overall?
Matthew: could talk about that for about an hour, quite frankly, but Phase 1 originated out of the U. S. Based on CERCLA and what they call Superfund Regulations, and it was a very specific exercise that was developed, and it's been applied around the world and outside the U. S. Not, not in an incorrect way, but it the essence of it Really doesn't take hold outside the U.
S. because it is based on U. S. regulations, but the very steps that you go through to complete a phase one can be used around the world and it is by default a standard that is is used. Now that's just a small piece of the puzzle. So environmental, social, and governance is a much broader concept.
When I, when we piece together a due diligence program, there's four things we look at. We look at. Subsurface issues, we look at buildings and [00:05:00] infrastructure, we look at operations, and then we look at the business. ESG falls under that business piece. Phase one is just a small sliver of the first bucket, the subservice issue.
So it's the two different, two pieces in a very broad spectrum of considerations and risks that we like to look
Phil: Interesting. So, it seems like you have a very comprehensive view that you have to take, and I would expect nothing less given the nature of the work. I'm going to shift now to Graham and ask the same question. What do you see as some of the major changes? Main drivers of current trends in your work.
Graham: I think over the last, five years, almost, we've seen a big shift in the way that we are advising our clients on M& A deals. Typically, we've looked at pretty much two separate aspects in terms of, Land contamination, in terms of the below ground risk that Matt was referring to. And also environmental health and safety compliance, which is associated with [00:06:00] how that business is operated. I think even though the focus has, has changed a lot in the last two or three years because of the emergence of ESG, those original areas of land contamination in EHS compliance. We're still looking very closely at those. They, they haven't gone away, but obviously the, the emergence of ESG, through regulation, et cetera, has become a much bigger part of, of our M& A approach.
I think the complexity is at the minute or the challenge really. Is, is that the, the legislation and the interpretation of that is, is very complex and also that the legislation is changing. So the challenge is for, for not only us as advisors to keep on top of those changes, but for our clients to do the same as well.
Phil: Okay. That makes a lot of sense too. So Graham, I know it's in your [00:07:00] background. You have a lot of work with real estate and corporate M& A transactions. And if I cross that against something that's interesting in Ida's background, we talk about um, an example of an oil train derailing or a contaminants from something, you know, a plant, threatening a city's major water, drinking water supplies.
from the perspective of a traditional business, where we have the risks and diligence concerns you're talking about, can you talk a little bit about some of the some of the key challenges uh, regarding environmental diligence?
Graham: Yeah, obviously in terms of the land contamination perspective, which is, I think is what you, you are referring to there. Again, it's down to the regulatory landscape, which is, which is reasonably complex. it's reasonably well advanced in the UK. So, so we would, we would look at the regulations in place, and advise businesses. In terms of [00:08:00] what that UK legislation is and what they may need to do, in terms of addressing environmental risk, particularly associated with, with, with pollution and contamination in that regard.
Phil: And is that something that you guys might work on, Graham and Ida, that, you know, Graham would be working with a company, maybe it's headquartered out supply chain in Asia or Africa or different parts of the world. Eda, how do you, how do you work with, how do you work with someone like Graham or how do you see those challenges
in terms of environmental diligence for the organization and some of the things that you might, you might dig into, you might be concerned about.
Eeda: in terms of environmental diligence. And of course on our side, there'd be a lot of focus with the overall deal team and they can be placed anywhere in the world. And everyone has an environmental consultant on their side. So we do see a lot of cross communication between different consultants and different stakeholders within an m and a or an investment opportunity.
When we're looking at the E [00:09:00] side of ESG, the environmental. Impacts and risk. A lot of this comes down to the nature of the deal and the nature of the asset. And, you know, the E side is, is very well understood in, I think, M& A, where you can touch it, you can feel it, you can see it. You know, This site takes up X amount of space in this land.
There's an underground storage tank. There's a history of release. These things for us are very easy to quantify and find, or under CERCLA language, what we call nature and extent understanding where and what it is. Where this leads into social and governance when you look at it from a larger picture, is how does potential environmental contamination affect the surrounding area, the communities, the individuals, the people?
Is there a risk to downstream groundwater, for example? And that is where sometimes it gets a little bit harder to build the conceptual site model and more conversation and [00:10:00] more research is needed in those cases.
Phil: Isn't it also harder to kind of make some sort of apples to apples comparisons, right? I mean, if you talk about, if you compare the U. S. to the E. U. to some Southeast Asian country that may not have the same level of, Consumer protections or social safety net, it could be a more difficult challenge to, to, to manage.
Is that fair?
Eeda: it is fair, but the general approach to this is when, you know, when I'm looking at a, looking at having to do a diligence, and it does, it honestly, it doesn't specifically matter what the diligence is on. The thought process remains similar. The first question is, are they meeting local regulatory environments?
What country are we operating in? What is the local regulatory environment? And assuring that they're, you know, Crossing over that bar. That's step one. The next step, and this is where it does get a little bit fuzzier, is where does this stand against global best practices or an international screening [00:11:00] criteria?
So, in Asia, the majority of Asian countries are non OECD countries, or what we'd say non designated countries under the equator principles. So, Those transactions, those investments get held against something called the IFC performance standards. So that would be the next step. And the IFC looks at 8 different criteria to assess environmental and social governance.
And I won't list all of them off, but in short, it covers over, you know, how is environmental and social risk identified and managed? How is pollution control managed? Labor rights for staff working on the sites, and then looking at the larger area, biodiversity, cultural heritage, indigenous peoples. So, for me, it's a two step screening process, local regulatory environment, and then the global standards that we're comparing to for this particular investment or acquisition, and that can [00:12:00] change depending on who the stakeholders are.
Phil: Outstanding. I love how you landed on the two step process. I want to come back to Graham and ask his perspective a little bit from the diligence perspective, and then Matthew a little bit about what financial services firms are, think and, and see as challenges when they, encounter that sort of challenge.
Complicated landscape. Graham?
Graham: I think Ida makes a very good point there, that there are some very niche, local regulations wherever you are in the world. I think the advantage of, of being part of the Inogen Alliance, all of us have a very broad, detailed knowledge of, of environmental regulations and, Assessment of risk, probably in our own jurisdictions and, and generally, but I think being part of the Inogen Alliance, we have, we have experts in, in many parts of the world.
And we rely on that, that local knowledge, which can be very niche in terms of how those regulations [00:13:00] are applied in those specific geographies.
Phil: So from your perspective, Matthew, I know financial services industry professionals think about the challenge and think about the, the approach.
Matthew: at. Yeah. So, I mean, you're already getting a sense of the differences in due diligence from Edith's perspective and her client drivers and Graham's. And then here in the U S here in the U S it's very business oriented. Some of the. Drivers that Edith spoke to don't come into play on most of the the U.
S. multinational deals and particularly the in the private equity space in the U. S. Again, it's all driven by the stakeholders and the demands of either the limited partners in the case of private equity firms or the uh, the customers of the portfolio companies that are going to demand some sort of rigor around.
Something beyond just compliance, right? [00:14:00] So when we look at my job is to, is to get the deal done, advise on downside risks which can manifest themselves into liabilities. I distinguish between those two terms and then, you know, get them comfortable with the, the risks under the environmental health, safety, sustainability, and ESG umbrella.
And every, Every client you know, first thing I, I look at is I look at the client. I understand what they're trying to do with the deal, what their investment thesis is, what their risk tolerance is. And I cater the, the approach for the due diligence to that, that set of criteria. Yes, we go through the downside risk associated with compliance.
We advise on the operations of the business, but. I like, I'm a business guy, I like to listen to what they're going to invest in, what they're going to do post acquisition with that business, and what they need to think about just beyond [00:15:00] the regulatory compliance work, beyond the immediate liability with a contaminated tank in the ground.
I, you know, if they want to expand that business or, Invest in it. There's some environmental health, safety and sustainability considerations, including ESG, that may trip them up. So it's a different set of drivers, I think, than what I typically see in the financial services industry. And again, comparing that to strategic buyers, I have clients here in the U.
S. that
couldn't give a hoot about ESG. They just want to know if they're sitting on a landfill, if they're buying contaminated land. And if, if they're going to, if the health and safety is enough to keep them going without killing, killing somebody. Now I'm exaggerating a little bit, but that's, it's not far from the truth in some cases.
So it's, it's a big spectrum of, of needs and an interest when I advise a client on any particular deal. Yeah,
Phil: I could totally understand [00:16:00] how some people in the US, you know, really don't care or even actually anti ESG for a number of different reasons. But I think sometimes there's a risk of overlooking something that's a not so obvious risk down the, down the road for which they might be responsible.
So I want to ask Ida to comment. I think that there are risks. That are, if you're responsible for things in your supply chain, then you're in the U. S. and you're not going into, into Asia or not thinking about your risks into Asia. There are consumer risks. There are regulatory risks that doesn't matter that you're sitting in New York.
That could still be a problem from your down the road. I mean, would you agree with that? Could you add to that?
Eeda: I do actually agree with that and actually to build off something that Matt said intent really matters what the stakeholders are trying to do and get what they deem to be a successful mergers and acquisition or investment because, you know, coming into Asia, there is. [00:17:00] Rightly or wrongly, a expectation or an understanding that whatever it might be someplace else in Europe, in North America the regulatory standards here for health and safety and the environment aren't going to match up to that.
Sometimes, some countries that's true, some countries it's not, but that's generally the perspective for Asia. So when, when investors are coming in with that mindset, They're already thinking ahead. I know that I'm going to have gaps. So in the, in the diligence, in the early stages of the deals, one of the things that we try and do is kind of give them a sneak peek or a highlight of, all right, you're coming into Thailand to do rooftop solar investment, you know, you're not going to have a biodiversity issue to say, but be ready, you're going to see an issue with safety and work at heights, you know, and, and giving them that, that heads up and it's like, okay, so you know that.
In your successful investment, your successful acquisition, as part of your post merger, post [00:18:00] acquisition, you're going to have to spend some money to improve the level of health and safety at your sites to meet your company's standards. intent really matters in risk identification and how they want to manage that after the deal is closed.
Phil: health and safety is a real financial and operational risk that these businesses are undertaking when they conducted an M& A deal with or without ESG, is that fair?
Eeda: a hundred percent. I mean, if you think back to traditional due diligence, EHS due diligence, health and safety is a critical component to that because that's where sometimes a lot of your biggest risks can happen. I mean, obviously nobody wants to spill a chemical on the ground, but it's a very different conversation if your activity results in a fatality.
Phil: Okay, so EHS is an older framework, and ESG is a newer framework, and there's some sort of connection, some sort of interconnection when we're thinking about M& A.who's really leading the charge? [00:19:00] And how do you guide your customer, your client, to really understand who they should pay attention to?
Is it the consumer who pushes the policymaker to change policy? Is it the policymaker who sets a vision for their country or their region? Is it a, business leader who sets a standard to differentiate them from the pack? Who do you feel is really leading the change and how does it matter to your clients?
Graham: I think from my perspective, I think it's a combination of all those, Phil. I don't think it's any one individual group of people that are leading that. just leaping back to what, to what Matt was saying just about, Some of the clients that he works for in terms of, they're not really engaged in ESG, they're not really engaged in EHS, they want to get the deal done and make money.
I think sort of looking at that the other way around, I've got a few clients that I work for, And they're almost the opposite side of the spectrum. They [00:20:00] want to be the market leaders in ESG, in EHS compliance. They want to set the standard. And I think it's businesses like that that are also driving the agenda forward.
And, obviously as consultants, we need to keep up with that. So yeah, for me, it's a mixture of all those entities that are, that are driving things forward.
Matthew: I would agree. And I, I don't want to leave you with a, the wrong taste in your mouth as far as ESG We have clients client like Kellogg, extremely sophisticated, consumer brands, super important very focused on environmental, social, and governance.
And when they request due diligence work, it, it absolutely requires the full spectrum of, of due diligence items that aren't driven by. The regulators here in the US, they're driven by customer demands, right? So that's one of them. What we're seeing here in the US is they're only doing [00:21:00] what they need to, to meet anticipated regulations coming down the road, like the SEC rulings and that sort of thing.
Now, I will say this, I have a lot of clients that they don't know what they don't know. my job is to, when we talk, I get very, I talk about clients that are operating within the US. Then we have a whole group of clients. About 40% of my business is outside the us and my job is to listen to Ida, listen to Graham.
When I have a client that is multinational, is embarking on a, an m and a an acquisition that is global, I have to advise them of these considerations that, and drivers outside of the US that they may not be accustomed to. we can build those aspects into the dual diligence program and be very country specific, you know, it's not all about the U.
S. by any means
Phil: Well, I appreciate you sharing a little anecdote from a client, and I'm curious if you know of an [00:22:00] experience or a story that you could share where insights from the Alliance have actually helped clients open their mind, and Change some of their expectations or otherwise exceed expectations from what they expected from a the diligence execution or for the, from the, from a standard practice of an M& A transaction.
Matthew: yeah maybe I could speak to a project that actually, I think both Ida and Graham worked with me on, it was an uh, an acquisition, it was about a year, year and a half ago by a company. Japanese based It's a publicly traded company. It was announced and they acquired a specialty chemical company and we dealt with the UK, we dealt with Italy, we dealt with Singapore sites in the U.
S. Site in France, and all of those geographies came into play. And it was unique in the sense that. It was a a spinoff of, of a division of this company. And they were sort of getting cut off from the, from [00:23:00] the mothership. And as we, as we engaged in that process, we became more and more focused on the post acquisition integration aspects of the business, as opposed to clearly the risks identifications, working with legal counsel to accommodate these exposures that we called out were, were important.
But. The, the integration piece was, was as big as the, the downside risks and how are they going to manage some of the things that are going to be left out of the deal as far as human capital systems and programs, things you don't normally think of as a downside risk with a, with a due diligence project.
It's, it's more about the business and operating post acquisition.
Phil: Okay. So does this example bring up anything to you, Graham or Ida, that, that sparked some interesting lessons that you might want to share or expand upon in a, in a work on a project like this?[00:24:00]
Graham: think in terms of, in terms of a similar example This was a confidential project, we did. Probably a couple of years ago, it was an engineering business. They were buying another, another smaller engineering business. And I think just in general terms, again, they were looking to organically grow their business and expand into new markets.
And I think from, from a compliance point of view, and probably in the early stages of ESG, they almost just wanted to spend as little as possible. Acquiring these businesses so that they could, keep the money back for, for sort of future expansion, et cetera. I think throughout the process of acquiring those businesses and the due diligence that, and the areas that we looked at, they actually realized by spending more money at the time, there would be future opportunities emerging that they would, they would realize.
[00:25:00] So they were almost. Investing in their own future. And I think there was a bit of a light bulb moment halfway through that project where they were almost constantly expanding our brief so that they could assess further, further areas and almost realize the full potential of their business.
Phil: That sounds pretty amazing. It must have been pretty, pretty satisfying. Are you going to share something, Ida?
Eeda: Just to follow up a bit on the project that Matt was talking about, I think, you know, similarly, there was a bit of a lightbulb moment for us. Matt wasn't there when we were going through the diligence, and then we were talking, and it's like, there, no matter what, this deal is happening. So now, what are the next steps for this?
How do we, How do we help them achieve the most successful deal and post acquisition activities to ensure that they're able to operate? Sometimes that happens when you're in the middle of, of a diligence that no matter what the findings are, the, the stakeholders deem the activity to [00:26:00] be of critical importance, the, the acquisition, the investment, the divestiture and, That they'll do whatever it takes to make it successful in the back end.
And then the transition of not just identifying the risk, but really how do you practically address that risk? Cause there'll be costs associated with it. There'll be additional activities. So it goes beyond, well, this is a problem. This is not a problem, but really how to build the plan to, to rectify and manage that risk.
Phil: It seems like some of those risks could be so material that they might threaten the deal. Do you find yourselves really trying to quantify them in a serious way, or are they just, or they just not get that big?
Eeda: No, I mean, sometimes, sometimes deals are that big. Sometimes risks are that big. why when, when we're going through, going through a due diligence, one of the first key questions is what's the level of materiality? What is, what defines a, a fatal red flag or a critical flaw? And [00:27:00] what's the cost associated with that?
And that can be scalable depending on, you know, how much investment is going into this particular deal. I've seen you know, relatively small deals where the. Level of materiality can be as low as, you know, 10, 000 USD for very, very small activity all the way up to, you know, well over hundreds of thousands of dollars because it scales depending on just how large the deal is and some of that's to the risk appetite of the stakeholders and, you know, how badly they, they want to actually execute that deal.
Phil: So, Ida, you, you said some things that lit up both Graham and Matthew. So I'm going to go to Graham because it hit him first and then go to Matthew. So,
Graham: Yeah, I was just going to pick up on, on, on something that, that Matt and, and Edie were alluding to in terms of the, the post, acquisition piece, really. And it was just a general point that I think sometimes [00:28:00] clients and advisors Almost focus on the deal solely and don't look a year, 18 months, two years down the line.
All the energy is focused on getting that deal over the line, but they're not looking at the future. So if, if the deal works out perfectly And everything's in place. But what about when things start to fall apart? Because, for example, the ESG cultures of those two businesses are not quite aligned and they, they pull further apart as time goes on.
And other issues like that. So I think it's not always just about the deal as Matt and Ida were relating to, it's about, the future of that business in the years after the deal's over the line.
Matthew: I can add in, um, I've worked on hundreds and hundreds of deals. I've probably killed two in my career, maybe three.
And it always revolves [00:29:00] around uncertainty and third parties. I always say it's perfectly okay to have an issue, as long as you can get your arms around it, you can quantify it, you can characterize it, and you know what you're dealing with. As soon as uncertainty creeps in, or in particular, you're associated with third parties, third party exposures, you're dealing with the public, or litigation, or whatever, there's some crazy stuff that we get into.
It's it becomes unmanageable at a certain point, and I'll give you an example. this is about 10, 12 years ago, I was advising a private equity firm buying a small engine manufacturer advising on the purchase of a small engine manufacturer out of Europe, and as part of the engine assembly process, They were using gaskets in the engines, and they were made of asbestos, [00:30:00] and this had happened, these workers simply had handled these asbestos gaskets for a period of 20 years.
The operation ceased. It wasn't going on at the time of the acquisition, but the idea that workers were exposed to asbestos for a period of time, even though there are no complaints, even though there were no issues at the time, it It was a complete unknown. And so the, the PE firm just walked away. They said, we just can't, we can't quantify that risk.
Right. I've had clients buy multimillion dollar contaminated solvent plumes in the ground that go off site and they know what it is, they can manage it. But if they understand it, they can manage it. It becomes a cashflow situation and that can divest of it at some point in the future. You know, it's very manageable that all these things can be dealt with.
It's just But the uncertainty is the key. Yeah,
Phil: that's a really good, really good point about the difference between uncertainty or the levels of [00:31:00] uncertainty that could put a deal at risk and how you've successfully been able to help companies mitigate that, which is a really good, good thing. While you were talking, and while you guys were talking, a great quote from the old sage Yogi Berra.
Came to mind. And it says where you said it's tough to make predictions, especially about the future, right? You've got to help people make predictions about an uncertain future. And I want to throw another piece of uncertainty in there and see how you respond to it. It's no surprise to anyone that there's a big election coming in the U S if it goes one way.
We could, at, at best, at least at worst, see the status quo, right? If it goes the other way, we could see a real reversal and major policies in the US o on these issues. So I'm curious from your perspective, and I wanna start with EDA here likely story? The story that I hear most, the EU is driving the train right now.
But the U. S. getting on the train or driving or accelerating in a certain direction or pulling in the opposite direction [00:32:00] can either add momentum or a whole heck of a lot of friction. But Asia, Africa, and other parts of the world are going to have to deal with what happens because of the drive of the U.
S. or the EU. I'm curious how you would agree or disagree with that statement and how much uncertainty comes into your part of the world. Because of the policies that are outside of your control.
Eeda: Sure, and, and to be fair, I have a slightly unique perspective on this as being an American living abroad but I will avoid for all of our sakes, the, the, the things that we don't want to talk about on the, on the political side of what will happen in November. In, in terms of regulations, though, I do have to admit that The laws of the United States don't particularly impact Asia from an ESG perspective.
The biggest long term impact that we've had, of course, is the ASTM phase one, you know, which, which Matt had talked about earlier. We do use that here in Asia, and also it's similar, there's a, there's an ISO [00:33:00] standard that's very similar to the ASTM methodology for phase one. But there's always a caveat when we use it, you know, as applicable to the local context and that's just doing our best to follow the overarching process to identify environmental risk.
Other than that, the United States regulations for ESG Are not, are not having an impact on Asia, but the European regulations are, and that still can have an impact on American firms that are investing abroad. You know, we've had, I can't, can't say the company name, but we've, you know, we've worked with American based private equity firms that are investing heavily in Asia as part of their, their climate funds, and they do reporting into Europe as Article 8 and Article 9 funds.
Apologies for, for the legislative lingo there. they are American firms affected by European regulations, spending effort in Asia. And that's, that's how I see that connectivity happening is that the real [00:34:00] driver of, of ESG and ESG reporting. And that addition of ESG into due diligence is, is coming predominantly from Europe, not from the Americas.
Phil: Matthew Graham, what do you, what do you think of that?
Graham: Yeah, I'd, I'd largely agree with that in terms of where the, where the drivers are. I think there's a lot of, a lot of regulation already, already in Europe in terms of ESG the Corporate Sustainable Reporting Directive CSRD, Sustainable Financial Disclosure Regulation, SFDR, EU taxonomy, etc. I think those regulations are highly complex and they're also changing as well.
So it's not just what we see now in terms of regulation, it's what might be coming down the track. I think, yeah, I think Ida's right. It's, it's an interesting It's an interesting time politically across the globe. You know, we've just had in the UK a new government in the last, in the last [00:35:00] month. There was a bit of turbulence.
We'd, we'd had five different leaders of, of the Conservative Party probably over the last four years. I guess because the new government's only been in office a month, it's difficult to gauge where they're going with the agenda. I think they've professed themselves as, you know, a party for growth in the UK, which is initially encouraging, but we see UK stemming from Europe, it's difficult to see.
It's probably too early to say in terms of the new government that's, that's in office.
Phil: You know, you said something that really, resonates around the, the pace of change of government. You know, in the U. S., we don't expect it to change much, but every two or four years. But in the, in the U. K. and Europe, it could change frequently, multiple times a year. So I think, I wonder how much culturally that makes a change in how people think about the regulatory scheme.
Eeda: Do you have [00:36:00] any comment on that, here in Asia, I mean, the last two years have been very interesting from a political perspective. If you look, if you take the countries in aggregate, there have been a number of fairly critical elections in a variety of countries. You know, I think New Zealand had their elections, Philippines has had an election, there was an election here in Singapore and it always brings up interest and focus and kind of shakes things up, but then in the longer term, the regulations for the moment are staying relatively stable, but I think the question that major elections bring up isn't what is going to change, but Is it?
Maybe. We don't know. And it brings a level of unrest or disquiet to deals that might be happening during a transition period, even if it's not as likely that a regulatory shift might happen. So there can be, impacts to a deal without there actually being a real risk of regulatory change.
All[00:37:00]
Graham: think, that people in countries where elections are happening are going to assume that if a new, if a new government is in place, they're going to reverse legislation. Immediately, and it's going to be a complete about term. I think it is right. It's just the unknown.
What are they going to do? And I think that is sometimes something that can spook investors or, or at least make them a bit more cautious in terms of their, their investment decisions.
Phil: I could totally see that. So, Matthew, I don't want to uh, to label you as the face of tough business in the U. S. or anything, but from your perspective, a lot of people in the U. S. will say the EU has it wrong, right? And they say, you know, the EU's policies slow their economic growth and different things like this, right?
But It seems that these global deals for global growth are going to have multinationals are going to have to have global M& A. So there's going to be some, [00:38:00] some friction, some dissonance, right? How do you think about in the face of the, the, the discussion right now? How do you navigate that dissonance? How do you, how do you get people to be more comfortable?
That you know, as, as Graham was saying, be a little bit more a little more comfortable, a little bit more thoughtful.
Matthew: and I, I guess I wouldn't characterize it as dissidence. I would characterize it more as an acceptance of what they need to deal with. So, if they're going to engage in those geographies, they need to be aware of, of the drivers in those geographies and what they need to do to operate and be a good corporate citizen in Europe and meet the ESG rules and regulations in Singapore and whatnot.
So, they, they fully recognize those regulatory regimes and requirements and they, they'll do what they have to do to, to operate in those, in those arenas. [00:39:00] we have clients here in the U. S. that strive to meet ESG requirements. I spoke to some clients earlier about their own self rigor and.
Their own risks driven around brand or consumer drivers that are not regulatory pieces and those, they're primarily driven by the European regulations and quite frankly, our sustainability group is, depends on the European regulations to drive a lot of our business in that regard and the, in the U S.
Yes, there are some drivers from a regulatory perspective, the SEC rulings that the anticipation of possibly having to meet those requirements. Some companies are gearing up in that regard. But in terms of the, the governments and the, the policy changes between 1 government to the next, it's not going to affect the global interest around environmental, social and governance.
They're either in, they're out. The big thing in the U. S. is the Department of Justice and the anti [00:40:00] competitive rulings that they, you know, when companies buy and sell each other, they have to determine whether or not it's it's acceptable to the Department of Justice, and I, some of the biggest deals have fallen through because of some of the Department of Justice rulings which are driven by A lot by the administrations in terms of,the rigor and the interest promoting M& A or not promoting M& A.
And so that'll be inter that, that's probably one of the biggest effects, I think, on M& A in the U. S.
Phil: Okay. Thank you very much. So I have one last question for everyone for a quick response, just in terms of thinking about. Rethinking EHS, the future of EHS.
If you're going to say, you know, in this context how would you describe EHS in, in the future? where does it go? how does it help clients achieve their goals?
Graham: take
Phil:
Graham: a
Matthew: environmental health, safety, you know, lump in sustainability and ESG. Clearly is, [00:41:00] is not going to go away. In fact, I think it's becoming more prevalent some companies in the US in particular, private equity are actually use it to develop their business models around because they recognize the value that it creates by doing the right thing, by doing the By not having contaminated properties, by having safe workplaces, by employing a social justice, you know, and doing the right thing, being good corporate citizens.
They recognize that the walls of businesses are breaking down, so to speak, and that's what environmental, social, and governance has done. It's no longer about just what they decide on those 4 walls. It's about Inputs from the public, from the direct stakeholders, the financing institutions, everybody has a play in how they make their decisions now.
So environmental health and safety is clearly going to be front and center within that arena. It's just not going to go away. And I [00:42:00] would suggest, sure, environmental, I think will be more routine. It's going to be there. Containment of properties, liabilities. I think health and safety is probably going to be the biggest focus going forward.
Safe workplaces and the S and ESG. I've always professed that the social aspects and the social risks are going to be more and more important going forward. The environment is always going to be important, but it's going to be more routine, I would suggest. But the S is where I think is where I think that we're going to have to play.
Phil: Super, thanks so much for that, Matt, really appreciate it. Graham, what do you, what do you think?
Graham: You know, I was going to pick up on the S part that Matt mentioned. I think, I think he's exactly right. I think the environmental piece is still important. The health and safety piece is critical and won't go away. I think the tightening of ESG regulations will push us in the direction of [00:43:00] more comprehensive.
ESG assessments. I think at the minute where we are, certainly in terms of M& A, the E bit is, is very well covered in terms of ESG. And I think it's the S bit that that's very much missing. And I think that's where the focus will be significantly on the next couple of years.
Phil: Super, thanks. Eda, do you want to bring us home?
Eeda: Yeah, I'll do my best. So, I mean, environment, health and safety is a framework that we've been operating in for decades. We understand it very, very well. And, you know, we're very good at applying it globally, both to meet local regulatory standards and more elevated global standards. Global standards. The, the expansion into ESG is, is not a wholesale disregard for EHS, the framework that we understand.
it's a growth and an expansion and an acknowledgement that these deals, these investments have reached beyond the physical [00:44:00] boundaries of the property. And, you know, looking to quantify what those risks are to the community, To the long term impacts and, and looking at that through the supply chain.
So it's, it's widening our gaze. Environmental health and safety looks very narrowly, looks very focused. It's very downwardly, very inwardly facing to the deal. Adding social and governance is, is making us look out and forward and, and, and identifying risks into the future so that they can be managed and mitigated.
Phil: Awesome, thank you so much.
I feel a whole lot better knowing that professionals like you are out there on the job, bringing your expertise and your passion and your values to this discussion for multinational companies. Thanks for what you do. And thanks for being a part of the show.
Graham: Thanks,
Bill.
Eeda: you, Phil, for having us.
