Addressing Climate Change in Due Diligence for Corporate Transactions
The gravity of the problem of climate change is rapidly coming into focus. On November 23, 2018 thirteen federal agencies under the leadership of the National Oceanic and Atmospheric Administration, including among others the National Science Foundation, the U.S. Environmental Protection Agency and the Department of Defense, issued Volume II of the Fourth National Climate Assessment.
This report, which was peer-reviewed by more than 300 scientists and the National Academies of Science, Engineering and Medicine, warns that there is “significant, clear, and compelling evidence that global average temperature is much higher, and is rising more rapidly, than anything modern civilization has experienced, with widespread and growing impacts.” According to the report, those impacts – which include intensifying droughts, more frequent wildfires, increasingly heavy downpours, reduced snowpack, coastal flooding and declines in surface water quality – will “damage infrastructure, ecosystems, and social systems” in the U.S. and around the world.
Regardless of the political climate in Washington, D.C., companies are well advised to heed this most recent alarm bell. Those who have not yet done so should assess the physical, regulatory and financial risks that climate change may pose to their existing assets, operations, work force stability and supply chains. In addition, companies should consider such risks in the due diligence that they perform prior to entering into major transactions. This client alert addresses climate-related transactional due diligence for a company considering the acquisition of another company or its assets.
Environmental due diligence in corporate transactions is now commonplace.
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