ESG Investing

Mergers and Acquisitions Reveal ESG Trends

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As ESG assets under management set a course to reach $53 trillion by 2025—more than a third of the $140.5 trillion projected total under management—some of the most recent mergers and acquisitions (M&A) have carried a distinctly ESG tone.

Low-Carbon Deals

Some 140 low-carbon energy M&A deals were completed in the first half of 2021, according to Deloitte. The United States accounted for 22 of the transactions, followed by China with 19. As governments and companies strive to achieve net-zero goals, Deloitte believes these numbers at least partly reflect low-carbon technology’s potential as a core investment strategy.

More recent deals include the acquisition of US renewable energy retailer Inspire Energy Capital by Shell New Energies US, a subsidiary of oil major Shell. The procurement was driven by a goal to become a net-zero company by 2050. This summer, rival British Petroleum also purchased $220 million worth of solar development projects from US solar company 7X Energy.

Non-energy firms show signs of taking sustainability increasingly seriously as well, with buoyancy in ESG M&A activity currently evident across a variety of business sectors.

M&As across the ESG Field

Non-energy firms show signs of taking sustainability increasingly seriously as well, with buoyancy in ESG M&A activity currently evident across a variety of business sectors.

In June, the Sustainability Accounting Standards Board and the International Integrated Reporting Council completed their merger to create the Value Reporting Foundation. Strikingly, global alignment on corporate sustainability disclosure tops the newly merged entity’s agenda; it aims for sustainability disclosure to have the same level of rigor as financial accounting and disclosure.

The following month, venture capital group Blackstone bought Chicago-based ESG software, data and consulting services provider Sphera for $1.4 billion. Highlighting the growing importance of ESG issues to businesses around the world, Blackstone acknowledged ESG’s role as a key thematic focus for its investment strategy.

In August, Goldman Sachs agreed to buy NN Investment Partners, the asset management business of Dutch insurer NN. The €1.6 billion ($1.9 billion) deal simultaneously expanded Goldman’s European reach and greatly enhanced its capabilities in ESG—NN Investment Partners has around €223 billion ($262 billion) in assets under management across ESG-integrated strategies covering various asset classes.

German stock exchange operator Deutsche Börse acquired a majority 80% stake in ESG-focused data and analytics provider Institutional Shareholder Services in 2020, valuing the latter at just under $2.3 billion. Deutsche Börse said the transaction showed it was strongly committed to one of the “key megatrends,” positioning itself as a leading global ESG data player.

The Big Picture

Overtly ESG-focused mergers and acquisitions activity has the potential to remain strong as the world keeps moving towards climate change goals. When energy companies use deals to reorientate their businesses in favor of renewable energy or firms attempt to take advantage of trends such as a growing demand for ESG data, they place increasing weight on ESG issues—inviting more firms to take an ESG lens to studying acquisition targets.

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