[co-author: Callum Bobath, Camilla Cerruti, Simeng Fan, Lilyana Georgieva, Katelyn Groenewald, Shenaya Lalljee, Devina Patel, Samuel Tahir]
In our latest round-up of developments in ESG for UK clients, we cover the following topics:
- Clean energy M&A activity in Europe
- ESG readiness in M&A transactions
- UK finalises reporting standards
- Impact of Middle East conflict
Growing clean energy M&A activity in Europe
Who will this affect?
- As European clean energy M&A activity grows, this will impact investors looking to invest in such assets, including UK investors.
How could this affect you?
- The uptick in M&A and consolidation of the renewable assets market matters in particular for UK infrastructure funds, utilities, and energy investors. Infrastructure AUM in Europe has grown from c.€91bn in 2014 to c.€487bn in 2025, and nearly half of U.S. and European investors plan to increase their infrastructure allocations over the next three years. This is more than any other asset class. With lots of capital being invested in high-quality assets, prices are likely to remain high.
Europe’s market for high-quality renewable assets is consolidating. Specialist infrastructure funds now prefer large, multi-technology platforms over single projects. For example, one recent deal saw a Danish energy company sell its entire European onshore renewables portfolio, wind, solar, and battery storage, across Ireland, the UK, Germany, and Spain. This reflects a broader trend: integrated utilities are streamlining portfolios and offloading onshore assets, creating strong deal flow as record levels of private capital enter the sector.
Deal flow is driven by a few key forces. The EU’s 2050 climate goals and policies like the Renewable Energy Directive are pushing investment in clean energy. At the same time, there is an increased focus on energy security as well as the long-term transition. The International Energy Agency expects renewable, especially solar, to grow faster than any other power source, driven by rising demand from data centers, electric vehicles, and air conditioning. Growing energy use from AI is also shaping M&A, as generative AI boosts cloud adoption and drives rapid expansion in Europe’s digital infrastructure. Data centers are leading growth.
Data has shown that buyers are becoming more selective, as they prioritise investments in projects that are ready to build with grid access, clear permits, and solid revenues over projects that are early-stage or speculative. Further, the scale and complexity required for AI infrastructure has accelerated the use of consortium, co-investment, and cross-border deals, creating new opportunities in clean energy.
ESG readiness as a consideration in M&A transactions
Who will this affect?
- This will impact all UK companies carrying out M&A activities, as ESG is treated as a core deal requirement. Similarly, this will impact any UK sellers and lenders involved in M&A processes.
How could this affect you?
- Parties looking to take part in M&A may see weak ESG readiness as a reason to lower the price, therefore slowing down the deal. This may also push for more targets to have more robust ESG data in order to attract interest from buyers.
Linked to development (1) listed above, ESG readiness is an emerging benchmark for assessing whether a target company is deal-ready in M&A transactions. Sustainability and ESG factors continue to play an integral part of the valuation and due diligence process for M&A deals. Buyers, particularly in continental Europe, are increasingly prioritising ESG-aligned targets in an effort to reduce transition risk and ensure integration readiness.
Recent market commentary also highlights that gaps in ESG reporting or climate risk governance are now contributing to valuation adjustments and greater post completion integration costs, making ESG readiness a practical indicator of deal preparedness rather than a differentiator.
In addition, the continued wave of energy transition focused M&A activity across Europe, including several large renewables transactions reported in early 2026, demonstrates rising demand for ESG-robust assets and increased competition among bidders.
UK-specific drivers: regulation investor expectations and diligence
UK regulatory momentum is reinforcing the importance of ESG readiness in transactions. Large buyers now require robust sustainability data, such as detailed carbon footprints, environmental performance data and modern slavery evidence, from their suppliers. For UK buyers, these expectations are shaping diligence scopes in cross-border transactions, where a target company’s ESG maturity is becoming a factor in execution risk and integration planning.
UK corporates, private equity sponsors and infrastructure funds remain active in European clean energy and climate tech acquisitions, and recent renewables deals reported in early 2026 demonstrate sustained buyer interest in ESG-aligned assets rather than any specific preference based on reporting maturity.
UK finalises Sustainability Reporting Standards
Who will this affect?
- These changes could impact all UK companies, but particularly listed entities that fall within future proposed amendments to the UK listing rules.
How could this affect you?
- The UK Sustainability Reporting Standards (UK SRS), are expected to apply to UK companies with a primary UK listing to disclose sustainability-related risks, although the scope of the mandatory sustainability reporting regime is also expected to expand to other large private companies in the future (subject to a separate government consultation).
On 25 February 2026, the UK government published the finalised UK SRS. These comprise two separate standards: UK SRS 1, which sets out the overarching disclosure requirements for disclosure of sustainability-related financial information, and UK SRS 2, which focuses on climate-related disclosure requirements. Read more about the content of the UK SRS in our article here.
Although the use of the UK SRS is currently voluntary, they are likely to become the benchmark against which investors, regulators, and other stakeholders assess the credibility of such disclosures. Early adopters may find themselves better positioned in capital markets. Notably, the UK SRS are based on the IFRS Sustainability Disclosure Standards (also referred to as the ISSB Standards). Therefore, companies whose sustainability reporting is already aligned with the ISSB Standards may not find significant differences by way of disclosure obligations. UK companies, particularly larger and listed companies, should familiarise themselves with these reporting requirements and, to the extent necessary, strengthen their internal governance, data systems, and controls to better prepare to align with the UK SRS.
In any event, UK-listed companies may become subject to an automatic requirement to comply with UK SRS. The Financial Conduct Authority (FCA) held a consultation on its proposal to replace its current Task Force on Climate-related Financial Disclosures (TCFD) aligned rules for listed companies' climate disclosures to mandatory reporting against the UK SRS from 30 January to 20 March 2026. Read more in about the FCA’s consultation in our article here. The FCA has stated that it plans to publish the results of its decision in Autumn 2026, and for the mandatory UK SRS requirement to come into force for reporting accounting periods beginning on or after 1 January 2027. The UK government has also stated that it intends to consult on introducing mandatory reporting requirements for private companies in the future (although the timing of such a consultation is currently unknown). In this context, the FCA’s consultation represents an important initial step in the UK’s transition toward a more consistent, internationally interoperable sustainability reporting framework. By aligning with the UK SRS and phasing out the standalone TCFD regime, the FCA is signalling a clear move toward consolidation, comparability and long-term regulatory stability. Companies should therefore begin assessing the practical implications of the proposed changes – not only in terms of reporting processes and data readiness, but also in relation to governance structures, assurance expectations and cross functional coordination.
Impact of the Middle East conflict on the UK government’s position on energy security
The conflict in Iran and across the Middle East has reinforced the UK government’s position that energy security and supply chain resilience should be considered central to national security and economic prosperity.
The UK government has made clear that the UK’s exposure to geopolitical shocks including the conflict in the Middle East, strengthens the case for accelerated investment in homegrown, low-carbon energy as a matter of national resilience, not only climate policy. Speaking in the House of Commons on 24 March 2026, Ed Miliband, UK Secretary of State for Energy Security and Net Zero stated “the events of recent days are yet another reminder that the only route to energy security and sovereignty for the UK is to get off our dependence on fossil fuel markets, whose prices we do not control, and onto clean homegrown power that we do.” Furthermore, the UK government has so far dismissed calls from the oil and gas industry group, Offshore Energies UK, to issue new licences to explore fields in the North Sea.
Since the beginning of the conflict on 28 February 2026, the UK government has taken a variety of steps to accelerate the green energy agenda.
This includes bringing the Contracts for Difference scheme, the UK government’s annual renewables auction for allocating funds to low-carbon electricity projects, forward to July 2026. Furthermore, on 24 March 2026, the government announced that it would be rolling out “plug-in” solar panels in shops within months and is working with retailers alongside solar manufacturers so that such products can be brought to market. In the same announcement, the UK government also implemented the Future Homes Standard. This includes measures to ensure a majority of new homes are built with solar panels and heating as standard.
The developments since the beginning of the crisis demonstrate that it is a space in which there is increasing opportunity for businesses and consumers alike.
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