By Vinay Shandal, Tariq Nanji, Mark Harris, Laura Borland, and William Lubega
For investors in North America, the challenges of climate change are creating correspondingly large opportunities for value creation. New technologies are emerging that, if funded, could contribute significantly to achieving climate and sustainability goals. At the same time, government policies are unlocking significant capital and changing the return profile. For investors, the biggest hurdle is making sense of these opportunities.
Vinay Shandal, Tariq Nanji, Mark Harris, Laura Borland, and William Lubega
Demand for climate investments is growing. Fundraising for climate funds nearly tripled in 2022, despite a 12% drop in private equity fundraising overall. That growth trend will accelerate. Between now and 2030, North America will require $6 trillion in additional capital if it is to stay on track to reach net zero by 2050. We estimate that private investors will commit up to eight times as much capital to the low-carbon economy by 2030 as they currently deploy. Government policies are a factor as well. The US has allocated $479 billion for climate and energy measures through the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act. Similarly, Canada has allocated over $109 billion in federal incentives for climate transition technologies, in addition to adopting several province-level measures.
Despite their clear potential, these segments pose challenges to investors. Some companies are start-ups looking to fund first-of-a-kind commercial-scale facilities. Others are pursuing partnerships with corporates that need balance-sheet capital. Consequently, investors must weigh the risks related to new projects and technologies, higher capital intensity, and uncertain demand—often in the same opportunity. Traditional definitions of asset classes must expand in order for investors to pursue opportunities in this increasingly attractive space.
We analyzed eight climate subsectors that we believe can generate both climate impact and financial impact. (A similar BCG analysis looked at the climate opportunity for private capital firms in Europe.) Our findings are summarized in the following interactive exhibits, which let investors explore all eight subsectors in detail—including key opportunities along the entire value chain.
Our analysis of subsectors includes the following highlights:
Most of the climate-related opportunities discussed here present new technology, policy, and counterparty risks for investors to navigate. In that way, they may test the boundaries of asset classes and fund mandates. Yet investors that understand the range of opportunities across the eight subsectors we have identified—and their attendant risks—can accomplish the dual goal of slowing global warming while also generating a significant financial return.
Vinay Shandal leads Boston Consulting Group’s Principal Investors & Private Equity practice in Canada, and is the global leader of the firm’s sustainable finance and investing business.
Tariq Nanji is a Principal in BCG’s Toronto office. He first joined the firm as a Summer Consultant in 2014, and returned full-time in 2015. He has worked with clients in Technology, Media, and Telecommunications, Financial Services, and Retail. His project experience has been diverse ranging from defining the 3 year strategy for a Canadian media company to enabling cultural change for a Canadian bank. Before starting at BCG, Tariq worked at Blackberry as a Radio Frequency Software Developer in product development. Tariq earned his MBA from the Rotman School of Management in 2015. He also holds both a Master and Bachelor of Applied Science degree in Electrical Engineering from the University of Waterloo. Outside of work, Tariq enjoys spending time with his wife and son, is an avid mixed martial arts fan, and loves to play volleyball whenever he has the chance.
Mark Harris is co-leader of Boston Consulting Group's Principal Investors & Private Equity (PIPE) practice in Canada. He works with Canadian investors across asset classes to develop fund strategy, optimize fund operations, assess new investment opportunities, and unlock tangible value at their portfolio companies. He is an expert in portfolio acceleration, fund strategy and operations, and digital growth and transformation.
Laura Borland joined Boston Consulting Group in January 2021. She is a core member of the firm’s Energy practice and specializes in growth/market strategy and M&A. Laura has ten years experience serving as a strategy consultant for oil and gas companies and investors.
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今こそ、グローバルな気候変動対策を行動に移す時 BCGはクライアントが気候・サステナビリティへの取り組みの道程を加速し、新たな機会をとらえて競争優位性を築けるよう支援します。
Private equity is becoming a powerful change agent for driving progress on ESG, climate, and sustainability. BCG helps private equity funds and principal investors create outsized value by integrating sustainability considerations at each stage of the investment life cycle.
昨今、サステナブルファイナンスをポートフォリオに組み入れる大手機関投資家が増えています。BCGの社会貢献領域のエキスパートによるサステナブルファイナンスについての解説をご覧ください。