In this edition of JSA Live, watch our partner Rajul Bohra discuss how aligning M&A investments in the Real Estate Sector with the principles of Planet, People, and Profit can help companies and investors achieve higher valuations, while ensuring compliance with regulations, and attain decarbonization targets. Acquirers, especially institutional investors, are increasingly preferring ESG compliant assets for M&A, which means that there is bigger focus on ESG factors while conducting due diligences (whether legal, title, technical or tax) and drafting transaction documents.
Rajul also highlights that the Government and regulators have also increased their focus on ESG elements. Steps such as notification of Energy Conservation (Amendment) Act, 2022, launch of ECO Niwas Samhita 2020 (guidelines for energy-efficient residential buildings) in 2020 by MoEFCC, allowance of 100% FDI for renewable power generation and distribution projects, introduction of the National Monetization Pipeline (NMP) in 2021 by the Government to monetize underutilized assets in a socially responsible and environmentally sustainable manner, recent introduction of thematic ESG category of mutual funds, approving the National Green Hydrogen Mission, amendment to the legal framework for CSR and mandating ESG-related disclosures under the SEBI regulations and business responsibility and sustainability report framework under the Companies Act, 2013.
Hence, while the Indian regulatory landscape mandates disclosures for ESG in limited cases, there is an imperative need for regulations which require evaluation of environment, sustainability and governance aspects of a target while examining prospective investments. Better collaboration of all stakeholders will lead to cleaner economy and sustainable progress in the real estate sector.