2021 Energy & Sustainability Report: Progress, Trends, And M&A

The COVID-19 pandemic revealed to the world just how unprepared entire business sectors can be when it comes to unexpected events of mass proportion, and just how delicate our global supply chains actually are. COVID has been a health crisis that impacted lives, economies, and industries. Climate-driven events and disasters occur on a more concentrated scale but have proven to be extremely costly and disruptive to multiple sectors in various geographies—a problem that appears to be growing more prevalent.  

• Nearly 60% of the companies in the S&P 500 have at least one asset at high risk of physical climate change impacts (per S&P Global Trucost).
• In 2020, the U.S. saw 22 extreme weather and climate change-linked events that each cost in excess of $1 billion (per the NOAA).
• These disasters collectively caused at least $95 billion in damages, killed at least 262 people and injured many.
• Before 2020, the largest number of annual major disasters in the U.S. was 16.

Sustainability is Surging

Within 5 years, renewables are on pace to surpass fossil fuels as the world’s largest source of electricity, and investors are looking to sustainable energy as the must-have holding of the future. And businesses leaders are recognizing that green initiatives are healthy for growing the bottom line. Climate-tech startups are on the rise. By 2030, investment in green startups and corporate innovation is projected to reach $3.4 trillion.

A growing sector for long-term sustainability plans includes data centers and high-tech building projects. Companies need to remain agile regarding where they store their data to facilitate both availability and sustainable long-term storage. Battery production plants are also expected to grow in demand as transportation becomes more electric-based.

The Norway Hotbed

The Scandinavian country of Norway is quickly becoming known as an ideal place for businesses pursuing sustainable initiatives. The country’s colder climate and low levels of humidity help to offset energy demands.

• It is the site of the world's largest sustainable data center, which runs on renewable energy via wind and hydroelectricity powered by Fjords surrounding the facility.
• Microsoft recently pledged to become a carbon-negative company within 10 years, and as part of this initiative, it chose Norway to launch its latest Azure cloud region.
• GitHub has also leveraged its presence deep in the Norwegian mountains through its Arctic Code Vault, a full archive of public repository data that can preserve millions of lines of code in open-source software for centuries.
• The startup Aquaai is using Norway as a testing ground for its new solutions that aim to improve sustainability in the fishing industry.

Green Bonds

The green bond market, also known as sustainability bonds, is now a trillion-dollar industry. Since market inception in 2007, the average annual growth rate has been calculated at approximately 95%. It’s a quickly growing way to fund key issues including climate change, biodiversity, energy efficiency measures, to name a few. 

In the first quarter of 2021, green bonds surged to $287 billion—that’s more than double 2020’s record-breaking numbers. In fact, Moody’s projects that sustainability bonds could reach more than $650 billion by the end of 2021. That’s a 32% increase over last year. Some of the corporations issuing green bonds this year include Amazon, Pacific Life, Aflac, Whirlpool, and MasterCard.

 

 

Employees & Consumers Drive Sustainability Demand

More and more, employees are demonstrating the desire to work for companies that share their values regarding sustainability and inclusivity, especially younger workers. For many, it’s about more than a paycheck. It’s about being part of something bigger—something that doesn't inflict harm. For businesses, finding the best talent going forward may mean being in touch with the younger generation’s values.

This is no different for consumers. People will pay more for a product that is created sustainably, or at least by a brand that represents their values. Trust and transparency matter more than ever, and many companies will not be able to afford to break that trust in an increasingly greener world. Businesses cannot regard sustainability as an afterthought. And they cannot fake it. These days, savvy consumers are tuned into social media and can tell which companies are genuine in their commitments. By investing in the right people and places, and staying accountable, companies can simultaneously improve our world while strengthening their own market share on a global stage.

Political Policies

As the United States has rejoined the Paris Climate Agreement (of which the goal is to reduce the global temperature by two degrees Celsius before pre-industrial levels), and the European Union pressures its members on carbon neutrality, sustainability is being more widely embraced for both startups and enterprises alike. The Biden Administration has introduced many clean-energy policies in the U.S. Further supporting the U.S.’s position on climate, the Federal Reserve recently joined the Network for Greening the Financial System. This is a group of central banks and supervisory authorities around the world collaborating to create climate risk management tools for the financial sector.

Energy and Sustainability M&A Deals in 2021 So Far

Dominion Energy acquired Birdseye Renewable Energy, a developer of utility-scale solar and storage facilities in the Southeastern US, for $38.05 million.

ACON S2 Acquisition Corp. took non-toxic, long-duration iron flow battery manufacturer ESS Tech, Inc. public in a $1.1B SPAC deal.  

TerraScale, a developer of renewable-energy powered data centers, merged with iQ International, a battery manufacturer to form a combined company to focus on enhancing sustainability and security in data center design. 

Montauk Renewables, Inc. acquired NR3, LLC, which uses zero-emissions processes to convert animal and agriculture waste into renewable biogas.

SparkCognition, an artificial intelligence company, acquired Ensemble Energy, developer of a predictive analytics and asset management platform for the renewable energy industry, for an undisclosed amount.

Dometic, a provider of mobile living products for RVs, boats, and campers, acquired Zamp Solar, a manufacturer of portable solar power solutions, for an undisclosed amount.