Over the last 12-18 months we have noticed a real shift in the amount of ESG work we’ve been asked to do, as the world increasingly takes a closer look at ESG practices.
In fact, the global ESG market is expected to reach $53 trillion by 2025, according to a report by Bloomberg Intelligence.
As we discuss this more and more with execs who are responsible for executing these plans (and because it’s now in their KPIs) one of the key drivers of the growth of the ESG market is the partnership between ESG startups and corporates.
In 2022, there were a significant number of deals between ESG startups and corporates, so
I’ll take a closer look at these deals and explore some of the benefits of these partnerships.
Unfortunately, due to confidentiality, we cannot diverge details on (100+) deals we have been responsible for between our corporate clients and startups/scaleups.
ESG Investment Deals
According to PitchBook, there were over 1,500 ESG-focused investment deals in 2022, representing a record high.
The total value of these deals was more than $105 billion, with an average deal size of $70 million.
These deals covered a wide range of sectors, from renewable energy and sustainable agriculture to healthcare and social impact startups.
One of the largest ESG investment deals in 2022 was the $3.7 billion acquisition of ChargePoint, a leading electric vehicle charging network, by TPG Pace Beneficial Finance, a special purpose acquisition company (SPAC).
Another significant deal was the $1.1 billion investment in Impossible Foods, a plant-based meat company, led by investors including Mirae Asset, Temasek, and Horizons Ventures.
These deals were not limited to the United States.
In Europe, investors poured nearly $8 billion into renewable energy startups in the first half of 2022, according to data from BloombergNEF. In Asia, ESG investment deals reached a record high of $36 billion in 2022, up from $27 billion in 2021, according to data from Refinitiv.
ESG Partnerships Between Startups and Corporates
Often, these partnerships can help corporates stay ahead of regulatory and consumer pressures to adopt more sustainable practices.
Corporates can gain access to technologies and business models that can help them reduce their environmental impact, improve their social responsibility, and enhance their governance practices.
On the startup side it helps gain access to the resources and expertise they need to scale their businesses.
These partnerships and deals are happening in every sector, as sustainability stretches across sectors, into supply chains, across borders and will affect every role within a company.
One example is the collaboration between BASF and the Dutch startup Sioen Industries.
Sioen Industries has developed a new process for recycling polyester, a commonly used material in the textile industry.
BASF is providing the technical expertise and resources to help scale the technology and helps BASF improve its circular economy credentials and reduce its impact.
In the logistics sector, UPS has partnered with electric vehicle startup Arrival to develop a new generation of electric delivery vans.
Arrival has developed a modular platform that can be used to build delivery vans, buses, and taxis, with UPS providing an initial order of 10,000 vans.
A high profile partnership in the retail sector is the collaboration between Walmart and TerraCycle, a New Jersey-based startup that specializes in recycling hard-to-recycle waste.
The partnership involves a new initiative called the “Loop” system, which allows customers to purchase products in reusable containers. Once the product is used up, the container is sent back to TerraCycle, where it is cleaned and refilled for future use.
Walmart is providing TerraCycle with the resources and distribution channels it needs to bring this new system to market.
In the financial services sector Goldman Sachs is partnering with the clean energy financing startup Generate.
Goldman Sachs has provided Generate with $250 million in financing, which will be used to support the startup’s clean energy projects.
In addition to providing financing, Goldman Sachs also provides access to its network of clients and expertise in project finance.
An accelerating trend
As businesses look for ways to reduce their environmental impact and improve their social responsibility, looking externally is critical.
The larger businesses do not have the skill sets or technology to build or implement the models needed to meet the ESG goals being set by government, shareholders, management and customers.
The significant investment dollars and number of investment deals in 2022 indicate that the trend is only accelerating.
These partnerships offer benefits for both startups and corporates, including access to technologies and business models, resources and expertise to scale businesses, and the ability to stay ahead of regulatory and consumer pressures.
Manufacturing, logistics, retail, and financial services are just a few examples of the sectors where ESG partnerships are flourishing.
As we continue to face mounting environmental and social challenges, ESG partnerships will become increasingly important in driving progress towards a more sustainable future.