You Only Price Twice

Once on the numbers. Once when ESG risk hits the books.

Walk into a deal room in the region circa 2018, drop the phrase “carbon credits,” and odds are you’d get a half-smile from someone in sustainability - if the firm had one.

Fast forward to today, and the conversation has shifted entirely.

ESG is no longer the nice-to-have appendix in the information memorandum. It’s right up there with EBITDA in shaping the narrative, the risks, and most importantly, the valuation.

And yet, too many deals still rely on traditional metrics to assess what are increasingly non-traditional risks.

"The ESG Clause Has Been Activated"

Let’s be clear: this isn’t about ticking boxes. Global investors have moved past that. And it’s not just opinion. A 2024 KPMG study shows that over 70% of institutional investors are now baking ESG factors directly into how they price and structure M&A.

Closer to home, Saudi Arabia and the UAE aren’t just following the trend but aligning national strategy around it. Vision 2030, the Net Zero by 2050 pledge, the Tadawul ESG Disclosure Guidelines - these aren’t policy ornaments. They’re reshaping what “asset quality” looks like in the region.

Which means ESG is affecting how capital flows, how buyers assess long-term viability, and how value is realized post-acquisition.

Same P&L, Different Future

Let’s say you’re acquiring a logistics company with an aging fleet and no decarbonization strategy. You could be inheriting:

• A future capex headache when electrification becomes regulatory,

• Insurance premiums that rise year-on-year,

• Limited access to ESG-linked debt.

Now contrast that with a target that has a verified emissions audit, a waste management system in place, and ESG disclosures aligned with GRI or SASB.

Same top-line, same margins, but a fundamentally different risk profile!

That’s not theoretical. I’ve seen these trade-offs play out in real transactions, where ESG gaps have either pulled down offer prices or pushed deals into extended diligence cycles.

Gone are the days when due diligence was purely about financials and compliance.

Now we’re asking:

• What’s your carbon footprint and what’s it going to cost in 3 years?

• Are your suppliers compliant with human rights and emissions norms?

• Do your governance structures align with investor expectations?

And yes, you don’t need perfect ESG data. But you do need to show progress, structure, and intent.

Missing that today? It’s like walking into a deal without audited financials.

You’ll lose the room.

Sovereign-Backed, Market-Tested

Let’s talk about context. In Saudi Arabia, we’re seeing state-backed programs monetizing carbon credits and reinvesting in green infrastructure. The Tadawul ESG Guidelines are nudging companies toward transparency.

In the UAE, we’re seeing mid-cap firms bundling ESG narratives into IPO readiness, and family offices exploring sustainability-linked bonds to get better terms.

Even after the ink dries, ESG remains in play:

• Integrating disparate sustainability reporting frameworks,

• Aligning internal cultures around governance and accountability,

• Finding quick wins on energy, waste, or supply chain ethics.

The best acquirers today are those who see ESG not as a compliance cost but as a lever for operational upside and reputational goodwill.

Smart Capital Asks Early

There’s still a bit of a gap in the Gulf between ESG ambition and execution. But that gap is closing - fast.  

If you're on the buy side, this is your moment to get ahead of the curve. If you're on the sell side, start building the ESG narrative before you go to market. The smart capital is already asking those questions.

If you're still treating ESG as the sustainability team's job, it's time to loop in your CFO.

Because if ESG isn't on the finance agenda, you're already behind.

#ESG #MENADeals #CorporateFinance #PrivateEquityGCC SaudiVision2030

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