Commercial Due Diligence Needs Impact Forecasting
A more complete view of risk, resilience, and long-term performance
Commercial due diligence has always been concerned with one central question:
what drives the sustainable performance of a business over time?
Traditionally, that answer has lived in market dynamics, competitive position, financial robustness, customer stickiness, and operational efficiency.
But the investment environment is shifting. Regulation, investor expectations, and empirical evidence increasingly point to a reality that many CDD teams acknowledge intuitively but rarely address explicitly:
“A company’s impacts on people, places, and the environment influence its long-term risk profile, resilience, and capacity to create value.”
This isn’t ideology. It is materiality — now recognised across financial markets.
Impact Forecasting is the tool that brings that dimension into focus.
Investors Already Treat Impact as Material — They Just Don’t Always Call It That
In the past three years, institutional investor surveys have shown a marked shift:
88% of investors have increased their use of sustainability information to guide capital allocation.
92% have made investment decisions based on expectations linked to the “green recovery.”
ESG–financial performance meta-analysis covering 2,000+ studies shows the relationship between strong social/environmental performance and corporate financial performance is predominantly positive.
These aren’t niche trends. They reflect a growing understanding that social and environmental impacts are not separate from performance — they are predictive indicators of it.
Yet CDD outputs often stop short of articulating this clearly, even when investors genuinely want to know:
“How is this business positioned in relation to the societal and regulatory shifts that will shape its market in the coming years?”
Impact Forecasting provides a structured answer.
Regulation Has Made Impact Financially Relevant
One of the strongest signals to the CDD community is regulatory design.
Across major jurisdictions, legislation now requires investors and companies to quantify how sustainability risks and impacts affect financial performance:
EU SFDR (Sustainable Finance Disclosure Regulation)
Requires asset managers and institutional investors to disclose how sustainability risks are integrated into investment decisions and how these risks are expected to affect returns.
This embeds a simple message: sustainability events can be financially material.
CSRD (Corporate Sustainability Reporting Directive)
Requires companies to disclose both:
How sustainability matters affect the business, and
How the business impacts society and the environment.
The explicit purpose is to give investors better visibility over long-term risk and value creation.
UK TCFD-aligned disclosure requirements
For listed companies, large corporates, and asset managers, disclosures must show how climate-related risks and opportunities influence strategy and financial planning.
In other words:
impact → risk → performance → investment decision.
This is precisely the chain of reasoning that due-diligence practitioners work with every day.
Why This Matters for Commercial Due Diligence
CDD has always sought to capture all factors that materially influence a company’s forward trajectory. Impact Forecasting enhances this in four important ways:
1. It strengthens the future-facing narrative
CDD teams must increasingly answer “resilience” questions:
Is the business aligned with emerging regulation?
Will stakeholder expectations constrain growth?
Does the company contribute solutions to structural challenges (skills, place-based growth, sustainability transitions)?
Impact Forecasting gives commercially grounded responses, rooted in evidence and recognised frameworks.
2. It sharpens risk identification
Many risks — licence to operate, workforce fragility, supply-chain vulnerability, environmental exposure — originate in social or environmental impact.
Regulators now consider these financial risks.
CDD teams can no longer afford to treat them as externalities.
3. It increases confidence in value-creation planning
Impact Forecasting identifies:
where impact strengthens competitive advantage, and
where targeted improvements (skills, community value, environmental efficiency, transparency) can enhance both impact and returns.
This informs 100-day plans, operational improvement strategies, and growth narratives.
4. It differentiates CDD practitioners in a competitive advisory market
As investors face rising disclosure obligations, advisory firms that integrate impact thinking demonstrate a deeper understanding of regulatory expectations and future performance indicators.
This is becoming a marker of sophistication.
How Leading CDD Specialists Incorporate Impact Forecasting
In practice, integration is light-touch and high-value:
Step 1 — Materiality Screening
Identify whether social or environmental factors have the potential to influence market access, regulatory compliance, stakeholder relationships, or operational resilience.
Step 2 — Compact Impact Forecast (3–4 pages)
A concise, forward-looking assessment aligned with recognised frameworks (e.g., UNSDGs, GRI, UK PPN/NPPS priorities, sector-specific obligations).
This sits alongside the commercial assessment, informing but not overwhelming it.
Step 3 — Integration into Value-Creation Planning
Translate insights into practical actions — skills pathways, community footprint, reporting improvements, supply-chain resilience, environmental performance.
Step 4 — Reinforcement in the IC Narrative
Provide investors with a clear articulation of how the company’s impact position contributes to risk management, resilience, and long-term competitive strength.
A More Complete Lens for the Deals Market
Commercial due diligence has always evolved in response to the wider economic environment.
As regulation and investor behaviour continue to converge around impact as a driver of performance, CDD practitioners are recognising that:
Understanding a company’s impact is not a moral exercise — it is a commercial one.
It reveals signals of resilience, exposes risks earlier, and strengthens investment recommendations.
Impact Forecasting completes the CDD.
If you are exploring how a structured Impact Forecast could complement your due-diligence work, we would be glad to share an example.
Author: Omar Hadjel MCIM, GRI Certified Sustainability Professional
