Increased M&A Activity Seen In The EHS Services Market As Investors Look To Capitalize On The Demand For Environmental Consultancy Projects
On May 17th, 2021, investment firm KKR announced its acquisition of a majority position in ERM a global EHS and sustainability consultancy. ERM has quickly utilized this influx of capital to acquire E4tech, an energy and sustainability strategy consultancy specializing in innovative and disruptive low-carbon technologies. These deals fall in a string of elevated M&A activity within the EHS services market, including WSP’s $1.14 Billion acquisition of Golder in December 2020 and TRC acquiring EMI Consulting, a clean energy solutions provider. These deals follow a trend of services firms equipping themselves with the expertise to tackle a higher volume of environmental sustainability projects.
Once dormant sustainability initiatives are becoming a more pressing concern for corporate enterprises and national governments alike. The eruption of interest in ESG issues over the last 5 years has ushered in a new normal, where organizations must display tangible evidence of proactive sustainability efforts to face up to unprecedented scrutiny compared with a decade ago. Environmentalist pressure is unearthing cracks in sustainability pledges, take Shell’s damaging court ruling after being sued by Milieudefensie alongside 17 thousand citizens, which epitomizes the switch in attitudes to sweeping environmental issues under the proverbial rug. These ESG factors, coupled with increasing investment in digital technologies will see the US EHS Services market reach $20.7 billion in 2024 at a CAGR of 5.6% according to a Verdantix Market Size and Forecast.
The increased importance placed on sustainability has led to a number of large contracts being won by services firms to provide both solutions to support government-backed sustainable infrastructure projects. Jacobs recently was awarded a contract for the US Department of Energy's Idaho Clean-up Project, the deal valued at $6.4 billion over a 10-year period. Similarly, Wood has been contracted by Summit Carbon Solutions to perform engineering solutions to develop gathering and transmission pipeline systems to support the capture and permanent storage of up to 10 million tons of CO2 annually. Another long-term services project was won by Golder in May 2021, to support the proposed Central West Pumped Hydro Project in New South Wales, Australia.
With reckoning all but inevitable for firms not committed to environmental initiatives, corporate appetite for consultant services has skyrocketed. Many firms have put in place accelerated net-zero pledges, with the likes of Apple, AstraZeneca, Ikea, and PwC citing 2030 as a goal for carbon neutrality and looked to services firms to kickstart internal sustainability projects. Take JPMorgan Chase & Co. which has worked alongside ERM in the development of its new Carbon Compass Methodology, this framework describes how it will align financing activities with the climate goals of the Paris Agreement. With ESG becoming more involved with corporate plans, we can expect to see more EHS services firms pivoting to address more environmental sustainability projects in the future.