Founding Partner
June 4, 2026
15 minutes
Environmental, Social, and Governance (“ESG”) considerations have moved decisively from the periphery of corporate responsibility to the centre of transaction execution. In UK-India M&A, ESG can increasingly influence whether a deal secures board approval, attracts investor support, and obtains the regulatory clearances necessary to close. In some cases, ESG considerations may determine not merely how a transaction is structured, but whether it proceeds at all. This article examines how ESG considerations affect cross-border transactions between the two markets at each of those three stages, and what practitioners, investors, and corporate decision-makers should do about it.
India and the United Kingdom are among the most active participants in global capital markets, with substantial bilateral investment flows across financial services, technology, pharmaceuticals, and renewable energy. The two jurisdictions share a common law heritage, but their approaches to ESG regulation diverge fundamentally: the UK operates a disclosure-driven, principles-based framework; India’s is prescriptive and state-led, embedding mandatory ESG obligations directly into statute. The challenge for transaction parties is not simply that the two jurisdictions regulate ESG differently, but that they pursue similar policy objectives through fundamentally different governance mechanisms.
For transaction parties, this divergence creates more than a compliance challenge. It affects diligence priorities, disclosure obligations, transaction documentation, integration planning, and stakeholder engagement. Acquirers frequently find themselves navigating two governance systems that seek similar outcomes through fundamentally different legal and regulatory pathways.
The UK framework is disclosure-driven and principles-based. Section 172 of the Companies Act, 2006 requires directors to have regard to the interests of employees, suppliers, customers, the community, and the environment. The UK Corporate Governance Code (2018, updated 2024) gives effect to this through a comply-or-explain mechanism [Companies Act, 2006 (UK), s.172]. The Financial Conduct Authority (“FCA”) mandates TCFD-aligned climate disclosures for premium-listed companies, and the UK Stewardship Code, 2020 requires institutional investors to integrate ESG into their investment and engagement decisions. Compliance is enforced primarily through market mechanisms: investor pressure, reputational consequences, and access to capital, rather than direct regulatory compulsion.
India has adopted a more prescriptive approach. Section 135 of the Companies Act, 2013 (“Companies Act”) requires qualifying companies to spend at least 2% of their average net profits on Corporate Social Responsibility (“CSR”) activities, making India one of the first jurisdictions globally to legislate corporate philanthropy [Companies Act, 2013 (India), s.135; Companies (Corporate Social Responsibility Policy) Rules, 2014]. The Securities and Exchange Board of India (“SEBI”) has reinforced this through the Business Responsibility and Sustainability Report (“BRSR”) framework, requiring extensive ESG disclosures from India’s largest listed entities [Securities and Exchange Board of India, Circular No SEBI/HO/CFD/CFD-PoD-1/P/CIR/2021/607, Business Responsibility and Sustainability Reporting by Listed Entities (May 10, 2021); Circular No SEBI/HO/CFD/CFD-PoD-2/P/CIR/2023/122, Business Responsibility and Sustainability Reporting by Listed Entities (July 12, 2023)]. Non-compliance attracts monetary penalties under Section 135(7) of the Companies Act, regulatory scrutiny by the Ministry of Corporate Affairs, and public disclosure of defaults [Companies Act, 2013 (India), s.135(7)].
For parties involved in cross-border M&A, these differing approaches create practical challenges at every stage. A UK acquirer assessing an Indian target must understand mandatory CSR obligations, BRSR disclosures, and sector-specific environmental approvals. An Indian acquirer pursuing a UK opportunity must navigate stakeholder-focused governance expectations and disclosure-based ESG oversight. ESG considerations accordingly influence transaction planning, risk allocation, and post-acquisition integration strategies in ways that parties need to anticipate from the outset.
ESG considerations affect the entire cross-border M&A lifecycle, but their influence is most consequential at three points: board approval, shareholder acceptance, and regulatory clearance.
Boards are increasingly evaluating ESG-related issues as part of their broader assessment of transaction risk. In the UK, Section 172 of the Companies Act, 2006 and the UK Corporate Governance Code together require boards to account for long-term stakeholder and sustainability risks when evaluating strategic decisions, including acquisitions. In India, Section 135 of the Companies Act and SEBI’s BRSR framework compel boards to maintain robust internal ESG controls and verification procedures, with false disclosures attracting regulatory penalties and reputational harm. Boards on both sides of a UK-India transaction are subject to ESG obligations, but the nature, scope, and enforcement of those obligations differ materially.
The 2008 acquisition of Jaguar Land Rover (“JLR”) by Tata Motors for USD 2.3 billion demonstrates how an acquirer’s ESG profile can be decisive in a competitive bid. Tata’s reputation for responsible ownership, long-term stewardship, and commitment to preserving employment and operational continuity differentiated it from competing bidders, whose approaches raised concerns about asset-stripping and job losses [Tata Motors Limited, ‘Tata Motors Completes Acquisition of Jaguar Land Rover’, Press Release (June 2, 2008)]. For JLR’s board, those credentials provided comfort about employment continuity, operational stability, and long-term investment. The transaction illustrates that an acquirer’s ESG profile may influence a target board’s assessment of long-term value creation alongside traditional financial considerations.
For dealmakers, the practical lesson is clear. ESG due diligence should not be limited to identifying regulatory non-compliance. It should also assess governance quality, stakeholder relationships, sustainability commitments, and potential reputational risks that may affect board approval processes.
Institutional investors have emerged as powerful gatekeepers in cross-border M&A. Many now evaluate companies through ESG frameworks that extend beyond financial performance, and stewardship obligations, sustainability mandates, and proxy adviser recommendations can all influence voting outcomes on significant transactions. The UK Stewardship Code, 2020 requires signatories to integrate ESG into their investment decisions and engagement strategies [Financial Reporting Council, UK Stewardship Code, 2020]. Where governance concerns, regulatory exposure, or stakeholder issues are material, investor support for a transaction cannot be assumed.
The disputes involving Vedanta and Cairn provide a useful illustration. While the underlying dispute arose from retrospective taxation issues rather than ESG enforcement [Glass Lewis, Proxy Paper: Vedanta–Cairn Transaction (2011); Cairn Energy Plc and Cairn UK Holdings Ltd v Republic of India (Award, Permanent Court of Arbitration, December 21, 2020, PCA Case No 2016-7)], investor reactions demonstrated how governance quality and regulatory risk increasingly form part of broader ESG assessments undertaken by institutional investors. The prolonged uncertainty compounded pre-existing investor concerns around governance, regulatory exposure, and stakeholder management, contributing to sustained value erosion for shareholders.
Acquirers should therefore assess not only legal compliance but also governance practices, disclosure standards, and stakeholder engagement strategies during the diligence process. A target with a strong compliance record but weak stakeholder relationships, or one facing unresolved regulatory uncertainty, can attract adverse investor sentiment that undermines shareholder acceptance of a transaction.
Both the UK and Indian competition authorities continue to apply their established merger control standards, but ESG considerations are increasingly arising alongside formal regulatory approvals, particularly in sectors such as energy, infrastructure, manufacturing, and natural resources.
The Competition and Markets Authority (“CMA”) retains the substantial lessening of competition as its core test but has acknowledged that environmental efficiencies may be relevant where they influence competitive dynamics in sustainability-driven markets, and has issued guidance on sustainability agreements under the Competition Act, 1998 [Competition and Markets Authority, Merger Assessment Guidelines (CMA129, 2021); CMA, Guidance on the Application of the Competition Act, 1998 to Sustainability Agreements (2023)]. The Competition Commission of India (“CCI”) applies an Appreciable Adverse Effect on Competition standard under Sections 5 and 6 of the Competition Act, 2002, read with the Combination Regulations, 2011 [Competition Act, 2002 (India), ss.5–6; Competition Commission of India, Combination Regulations, 2011 (as amended 2022)]. While neither authority applies a public interest test in merger review, ESG and sustainability considerations increasingly arise alongside merger review where environmental approvals, sectoral licensing regimes, or strategic infrastructure considerations are relevant to transaction execution.
In India, environmental approvals under the Environmental Impact Assessment Notification, 2006 make environmental clearance an explicit regulatory hurdle in sectors such as energy, mining, and infrastructure [Ministry of Environment, Forest and Climate Change, Environmental Impact Assessment Notification (2006, as amended 2020)]. Adverse findings can delay or block transactions and materially affect deal value. In the UK, the National Security and Investment Act, 2021, is fundamentally a national security statute and imposes no ESG or decarbonisation alignment requirement, but it carries indirect implications for investments in strategic clean-energy and sustainability-linked sectors, particularly where such investments intersect with critical national infrastructure.
The investment rounds completed by ReNew Power, drawing capital from CPP Investments, Goldman Sachs, Abu Dhabi Investment Authority, and JERA, illustrate how these considerations play out in practice [‘ReNew Power raises fresh equity of $265 mn’ (Business Standard, October 27, 2015); ‘ReNew Power Raises USD 300 mn via Rights Issue’ (The Economic Times, June 30, 2019)]. Those transactions required extensive engagement with Indian regulators to secure environmental approvals and demonstrate alignment with national renewable energy targets. Although not subject to formal ESG clearance in the UK, the involvement of UK-based institutional investors triggered due diligence requirements relating to climate-risk disclosures and governance standards. ESG commitments were embedded in transaction documents through warranties, covenants, and post-closing undertakings. Parties to transactions in comparable sectors should expect similar scrutiny.
As ESG considerations become increasingly material to transaction execution, parties should incorporate ESG assessments into each stage of the deal lifecycle rather than treating them as a post-signing compliance exercise.
At the due diligence stage, acquirers should look beyond traditional legal and financial reviews. For Indian targets, this means reviewing historical compliance with CSR obligations, BRSR disclosures, environmental clearance statuses, sector-specific permits, and any ongoing regulatory investigations or enforcement proceedings. For UK targets, particular attention should be given to TCFD-aligned climate-risk reports, governance practices, stakeholder engagement frameworks, and sustainability reporting obligations. Identifying ESG-related risks early helps parties assess potential liabilities, anticipate integration challenges, and avoid valuation disputes later in the process.
ESG considerations should also be reflected in transaction documentation. Depending on the risks identified during diligence, parties may consider ESG-related representations and warranties, disclosure obligations, indemnity protections, and post-completion covenants. In sectors such as infrastructure, manufacturing, mining, and renewable energy, ESG-related commitments may be particularly important where environmental approvals, sustainability targets, or stakeholder obligations have a direct bearing on commercial value.
The importance of ESG does not end at completion. Post-closing integration often presents its own challenges, particularly where the acquirer and target operate under different governance frameworks and reporting standards. Aligning sustainability reporting systems, governance policies, compliance procedures, and stakeholder engagement practices can be critical to realising the anticipated value of the acquisition. A failure to address these issues may result in regulatory scrutiny, investor concerns, or reputational risks that materialise long after closing.
Accordingly, ESG should be viewed not merely as a compliance requirement but as an integral component of transaction planning, risk management, and long-term value creation in UK-India cross-border M&A.
ESG considerations are no longer confined to sustainability reporting or corporate responsibility initiatives. They are increasingly influencing how boards assess risk, how investors evaluate transactions, and how regulators scrutinise businesses operating in sensitive sectors. In the UK-India M&A corridor, the differences between the two governance frameworks create genuine compliance complexity, but the experience of Tata-JLR, Vedanta-Cairn, and ReNew Power demonstrates that proactive ESG integration enhances deal legitimacy, supports regulatory clearance, and generates long-term post-merger value.
The three stages examined in this article form a continuum. ESG preparedness at the board stage shapes investor confidence, which in turn influences regulatory reception. Failure at any one point compounds difficulties at the others. Conversely, credible ESG commitments embedded early in deal strategy create a compounding legitimacy advantage that extends through integration and into long-term value creation.
While UK and Indian ESG frameworks continue to evolve towards greater alignment with international reporting standards [UK–India Economic and Financial Dialogue, Joint Statement on Sustainable Finance Cooperation (2024)], meaningful differences remain. Transaction parties should therefore assume that cross-border ESG compliance will continue to require a jurisdiction-specific approach for the foreseeable future.
ESG should therefore be treated as a core transaction variable rather than a standalone compliance exercise. In UK-India M&A, it increasingly influences whether a deal is approved, supported, and ultimately successful. Parties that address ESG considerations early are likely to enjoy greater deal certainty, stronger stakeholder confidence, and more effective post-acquisition integration than those that do not.
