Climate change is a global megatrend transforming capital allocation and M&A strategies worldwide.
This article explores the impacts of climate change on M&A specifically, outlining M&A trends as the economy adapts to the reality of a low carbon future.
Sectors likely to benefit
1. Renewables:
Solar and Wind Power: Increased demand for clean energy solutions is driving growth sector wide. Sector leaders are using M&A to acquire operational assets, allowing them to meet demand faster and mitigate project risk
EV Charging Infrastructure: Companies providing EV charging solutions are a downstream beneficiary of the rise in EV’s. These businesses can generate long term, infrastructure type returns and are seeing increased M&A activity.
Relevant Deal: Nash Advisory advised JET Charge on its capital raise led by the Clean Energy Finance Corporation.
2. Waste management and recycling:
Advanced Recycling Technologies: Companies innovating in waste reduction and recycling are becoming attractive M&A targets. Traditionally waste was a “boring” sector with low multiples – now its in high demand.
Circular Economy Solutions: Firms developing closed-loop solutions for products are seeing increased interest – “single use” is a term of the past and companies are turning to M&A to gain exposure to this evolution.
Relevant Deal: Nash Advisory advised Total Drain Group on its sale to Quadrant Private Equity. See the case study.
3. Green technology and cleantech
Carbon Capture and Storage: Firms developing technologies to reduce carbon emissions are attracting significant interest. Those that can generate alternate revenue streams through the generation of carbon credits are attracting strong valuations.
Water Management: Companies offering water conservation and purification solutions are becoming valuable acquisition targets.
Relevant deal: Nash Advisory advised WTS on its sale to Mak Water. See the case study.
4. Climate risk analytics and insurance
Climate Modelling: Firms providing climate risk assessment tools are becoming valuable acquisition targets. Early movers with scale can demand strong valuations
Environmental risk management: Intensifying environmental regulations and growing corporate sustainability commitments are driving demand for specialized environmental consulting services, spurring M&A activity
Relevant deal 1: Nash Advisory advised Point Group on its sale to ERM. See the case study.
Relevant deal 2: Nash Advisory advised Red Earth Engineering on its sale to Geosyntec Consultants. See the case study.
5. Green building and construction
Sustainable Materials: Manufacturers of eco-friendly building materials are experiencing growth as clients and regulators push stronger carbon agendas.
Disaster recovery: Companies specialising in disaster recovery, landslip prevention and future proofing vulnerable infrastructure are becoming attractive M&A targets
Relevant deal: Nash Advisory advised The Rix Group of Companies on its sale of a majority stake to Ghella. See the case study.
6. Eco tourism
As climate change awareness grows, there's rising demand for environmentally friendly travel experiences. Larger travel conglomerates and hotel chains are acquiring eco-lodges, sustainable tour operators, and carbon-neutral accommodation providers
Relevant deal 1: Nash Advisory advised Lake Argyle on its sale to Discovery Parks. See the case study.
Relevant deal 2: Nash Advisory advised Horizontal Falls Seaplane Adventures on its sale to Journey Beyond.
Relevant deal 3: Nash Advisory advised Red Cat Adventures on its sale to SeaLink.
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Sectors likely to be disrupted
1. Fossil fuel industry
Oil and Gas: Traditional energy companies face pressure to divest fossil fuel assets. Private and public scrutiny of these assets has been high in recent years leading to potential devaluations and forced sales.
Coal Mining: Declining demand and stricter regulations are making coal assets less attractive
2. High-emission manufacturing
Steel and Cement: Heavy manufacturing face challenges in reducing emissions, potentially leading to consolidation or divestment of less efficient facilities. However, the need for low carbon solutions is driving innovation and those at the forefront have become attractive M&A targets
3. Traditional automotive
Internal Combustion Engine Specialists: Suppliers and manufacturers heavily reliant on internal combustion technology may become acquisition targets for companies looking to repurpose facilities or acquire patents.
4. Non-sustainable agriculture
Pesticide and Chemical Fertilizer Producers: As sustainable farming practices gain traction, these companies may face increased competition and/or potential consolidation.
Valuations
Climate change is influencing how companies are valued in the M&A market. Green assets often command a premium as acquirers seek to future-proof their business models, while carbon-heavy operations are being sold at a discount.
This “ESG premium” or "carbon discount” reflects the growing focus of buyers on emissions management, regulatory compliance, and public scrutiny.
- ESG Premium: Examples include ESG consulting, solar farms, eco tourism, EV startups, and clean tech firms who often attract higher valuations due to their strategic importance in the energy transition.
- Carbon Discount: Fossil fuel reserves and coal plants are increasingly seen as stranded assets, with limited future profitability due to the transition away from carbon-intensive energy sources.
As valuations shift, companies with foresight are reshaping their portfolios—acquiring sustainable assets and selling carbon-heavy businesses to avoid the increasingly common “carbon discount”.
