Funding For ESGtech Will Accelerate In 2021 Following Twelve Deals In 2020
Market uncertainty and recession are guaranteed to sort the wheat from the chaff. As we all know, 2020 had extra-large doses of both uncertainty and economic contraction. Despite the worst recession for decades and a cliff hanger US presidential election, a wide range of investors and corporate strategists continued to believe in the future potential of ESG ventures. Deals in 2020 continued an investment trend that accelerated in 2019 after a trickle of ESG deals from 2014 to 2018.
In the VC and PE world, Diagram invested in Canada-headquartered Novisto which offers a cloud-based ESG data platform and boasts customers like Dollarama and Power Corporation of Canada. Rice Investment and Carnrite Ventures funded sustainability management software vendor Persefoni to the tune of $3.5 million. Nasdaq Ventures made a Series A investment in Sweden-based Matter, a software provider aiming to provide investors with more comprehensive ESG insight than is often available from the major ESG ratings providers. Bigger moves saw Bank of Canada put $30 million into GHGSat which, since June 2016, has launched high resolution satellites to track GHG emissions. In 2020, the biggest PE-led deal in the ESG category was the $200 million investment by CVC Growth in sustainability supply chain risk management provider EcoVadis.
The scale of capital deployed also varied significantly across the six deals involving strategics. At the small end of the spectrum, Nasdaq bought software provider OneReport adding just 10 employees through the deal in February. In October, NAVEX Global, an Oregon-headquartered GRC software vendor with more than 1,000 employees inked a deal to buy CSRware and its approximately 20 employees. In November, keeping its options open in the Asian market, Moody’s bought a minority stake in China-based MioTech. At the bigger end of the spectrum, Morningstar bought the 60% of Sustainalytics it didn’t already own, valuing the business as a whole at around €170 million ($210 million). In October, global financial information provider Refinitiv – itself in the process of being acquired by LSEG for $27 billion – bought the Red Flag Group adding 300 employees. In the US, activity closed out in December with the IPO on NASDAQ of Seven Oaks Acquisition Corp which raised $259 million to target ESG acquisitions. In 2020, the biggest deal in the ESG market – although not a pure ESG play – was the Deutsche Börse acquisition of 80% of ISS for €1.925 billion ($2.275 billion) from Genstar Capital and ISS management.
The rapid rollout of COVID-19 vaccination programmes in 2021 will accelerate ESG deal flow. With strategics historically being forced to buy up minnows to accelerate market understanding and product development, Verdantix expects to see far more involvement from the VC and PE community to drive growth in the ESGtech category. To learn more attend the forthcoming webinar “Investor Focus On ESG Will Reshape The Sustainability Market Opportunity”.