Building Strong ESG Narratives for Exit

Erin Gregoire

Principal Consultant

North America

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Erin Gregoire

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Barrett Lawson

Director

North America

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Barrett Lawson

Barrett helps companies develop sustainability strategies that create value and positive impact. Barrett specialises in reporting, disclosures and ESG due diligence for private equity and corporate clients.

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Table of Contents

• Tailoring ESG to Exit Context
• ESG-Ready: Preparedness
• ESG-Enabled: Integration
• ESG-Driven: Differentiation
• The Bottom Line
• Contact Us

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Exiting a portfolio company today requires more precision and preparation than ever. With valuation pressure high and buyers increasingly focused on resilience and long-term performance, differentiation has become essential. For general partners, exit is the opportunity to demonstrate both a company’s current value – its ability to manage risk and compete effectively today – and its future potential to unlock additional value under new ownership.

Environmental, Social, and Governance (ESG) narratives can be an effective tool in conveying this full value story of a company’s current position and how it can continue to grow responsibly.

A strong ESG narrative can:

• Broaden your buyer universe
• Differentiate a portfolio company in a competitive process
• Strengthen valuation positioning

Without integrating ESG at exit, much of a company’s hard-earned progress and potential may go unrecognised, and value could be left behind. Below, we outline key strategies for building ESG narratives to exit portfolio companies that are ESG-ready, ESG-enabled, and ESG-driven.

Tailoring ESG to the exit context

The way ESG features in an exit depends on its commercial relevance, the company’s maturity, and the sponsor’s goals. While there’s no one-size-fits-all approach, we tend to see exit strategies fall into three general categories, depending on whether the portfolio company is:

1. ESG-Ready: Focusing on demonstrating strong ESG risk management and readiness
2. ESG-Enabled: Utilising ESG themes to strengthen the broader investment story
3. ESG-Driven: Leveraging ESG as a differentiator that is central to the value story, unlocking new categories of buyers

These are not rigid stages, but flexible approaches that can be right-sized to the deal context, company profile, and buyer expectations.

ESG-ready: foundational preparedness

Demonstrating that ESG risk management and governance systems are in place and functioning effectively today.

When ESG is not a defining feature of the company’s investment thesis, the focus should be on demonstrating competence. This means ensuring the company can respond credibly to ESG-related questions, that key documentation is organised, and that ESG does not become a source of delay or surprise during diligence.

This often involves identifying the ESG topics most likely to arise in buyer conversations, compiling relevant data and materials (such as policies, compliance records, or emissions data), and preparing management to speak confidently to these areas. The emphasis is on transparency, organisation, and credibility, providing buyers confidence in the company’s risk management and governance practices.

The value of this approach lies in demonstrating that the company manages its risks systematically and proactively – giving buyers confidence in the stability, credibility, and quality of governance across the organisation. Even for companies still developing their ESG programs, strong organisation, transparency, and credible governance can go a long way in building buyer confidence.

ESG-enabled: integrating supporting themes

Integrating ESG as part of the broader business story, balancing today’s strengths with tomorrow’s opportunities.

For companies that have made measurable ESG progress, there’s an opportunity to position those improvements as contributors to commercial success and resilience. Rather than creating a standalone ESG section, this approach weaves ESG throughout the business narrative, using sustainability to strengthen priority exit themes such as operational efficiency, risk reduction, or customer and workforce engagement.

This could include highlighting strong safety culture as a sign of operational discipline, responsible sourcing as a lever for customer retention, or leading energy efficiency practices as a driver of cost control. These elements show not only how the company is performing today, but also how it is thinking ahead, proactively addressing ESG issues that buyers, regulators, and customers will increasingly expect.

Crucially, this approach should balance what has been achieved to date with what remains on the table. For example, if a company has improved data collection or energy management systems, it can highlight how the next owner could further capitalise on that by differentiating products based on unique sustainability attributes or certifications.

We’ve seen this approach work especially well when there is a credible voice within management, someone who can connect ESG performance to the company’s financial and operational story and articulate what continued progress could look like.

ESG-driven: key elements of differentiation

Positioning ESG as a strategic differentiator and value driver for targeted buyers.

For some companies, ESG is not peripheral – it’s core to their market positioning or buyer appeal. These are often businesses where sustainability is built into the product, supply chain, or brand, or where the buyer pool includes impact funds, strategic investors, or Article 9 funds.

Here, exit preparation is more intensive. It involves aligning management and sponsor perspectives, quantifying impact (such as carbon reductions, product efficiency, or workforce outcomes), and producing investor-grade materials that establish a central theme or focus for the Commercial Information Memorandum (CIM).

For instance, Anthesis supported a company producing insulating materials for apparel. Sustainability was central to its value proposition, so the challenge was to present that value credibly. By quantifying the downstream benefits of its products and developing a CIM-ready ESG deck, the sponsor successfully crafted a growth narrative built around sustainability differentiation – positioning the business as both resilient and scalable in a decarbonising market.

The strongest ESG stories at exit are data-backed, forward-looking, and aligned to business fundamentals, showing how the company can continue to unlock ESG-linked value under new ownership.

The bottom line

Exits are harder than ever, and differentiation is everything. ESG, when approached strategically, can help demonstrate that a company is managing its risks effectively, is differentiating itself among peers, and is positioned for future growth.

The art lies in striking the right balance between what’s been achieved and what’s still possible – highlighting current resilience and governance while framing credible opportunities for future value creation.

Whether that means demonstrating readiness, integrating ESG as a supporting theme, or positioning it as a central differentiator, a well-structured ESG narrative helps sponsors tell the full story of value creation.