Sustainable finance and its surrounding infrastructure offers growing potential for deals and green innovation.
By Tom Evans, Paul Davies, David Walker, Ignacio Domínguez, Michael Green, Aaron Franklin, Laura Kichenside, and Catherine Campbell
The global sustainable finance market has expanded rapidly in recent years, approaching US$320 billion in new issuances in the first 10 months of 2019. Sustainable finance — which is dominated by green bonds, but also includes sustainable bonds, sustainability-linked bonds and loans, and social bonds — represents a growing opportunity for private equity-backed businesses to tap into burgeoning demand from asset managers to put capital to work in investments that meet sustainability criteria. Further, recent M&A activity in environmental, social, and governance (ESG) ratings businesses demonstrates an increasing demand for ESG measurements and metrics from investors and regulators, presenting new PE investment opportunities. In our view, sustainable finance and its surrounding infrastructure — especially companies that support and assess compliance — offers potential beyond mere demonstration of green credentials.