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).
• The United States has sustained 400 weather and climate disasters since 1980, during which the overall damages/costs reached or exceeded $1 billion (per the NCEI).
• Before 2020, the largest number of annual major disasters in the U.S. was 16.
• The total cost of 2023's billion-dollar weather disasters in the U.S. was $28 billion.
• In 2024, there were 24 disasters exceeding a total of $24 billion in damage, leading to 418 deaths.

Sustainability is Surging

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. Business leaders recognize 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 must remain agile regarding where they store their data to facilitate 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.

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• 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%. These fixed-income financial instruments are a rapidly growing way to fund key issues surrounding climate change, biodiversity, and energy efficiency measures, to name a few. 

Green bonds have surged to reach a value of $600 billion worldwide. In the U.S., the biggest issuers of green bonds in recent years were Fannie Mae and California Community Choice Financing Authority; each issued green bonds worth 9 billion U.S. dollars in 2023.

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 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 created sustainably or at least by a brand representing 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 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 has been more widely embraced for both startups and enterprises alike. The Biden Administration 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 worldwide collaborating to create climate risk management tools for the financial sector. As we move into the future, the outlook for progress remains uncertain, with ongoing geopolitical tensions, new leadership regimes, and economic inequities. A second Trump administration in the U.S. could mean another withdrawal from the Paris Agreement and a reversal of the Inflation Reduction Act. Additionally, fossil fuel markets are expected to remain a priority, making climate progress more challenging in the U.S. Similar themes are taking place in the U.K., Germany, and France.

M&A

Around the world, companies in nearly every industry are facing increasing regulatory factors and societal pressures to reduce their carbon footprints. Shifts of this scale typically result in sweeping changes to business operations, consolidations, investments, and corporate developments. This level of action results in the need for more mergers and acquisitions to create environmental & sustainability deals.

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