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Private equity transactions in energy efficiency defy downward deal trend

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According to Market Intelligence, December 2022


Private equity transactions in energy efficiency defy downward deal trend

Private equity and venture capital-backed deals in the energy efficiency sector totaled $31.79 billion across 280 deals worldwide as of Nov. 14, according to S&P Global Market Intelligence data.

That compares to the full-year 2021 total of $16.36 billion across 307 transactions involving companies that operate in or provide services related to energy efficiency solutions, energy management, smart energy solutions and carbon emissions.

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The investment growth in the space defies the overall downward trend of global private equity and venture capital deployment in 2022 and comes at a time when companies as well as nations race to adopt sustainable energy management strategies to meet carbon emission reduction targets.

"The rising adoption of ESG policies across private markets has peaked interest in companies that are focused on improving energy efficiency," said Cameron Joyce, senior vice president of research insights at Preqin.

Investor appetite for the sector is likely to be sustained despite an expected slowdown across the board, "primarily due to the sheer weight of capital that is seeking to be deployed into assets that are favorable from an ESG perspective," Joyce added.

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Huge potential deal

The $31.79 billion total this year hinges on the proposed acquisition of Japan's Toshiba Corp. by a domestic consortium including private equity firm Japan Industrial Partners Inc., Suzuki Motor Corp. and ROHM Co. Ltd. It would be the largest transaction in 2022 by far with a $16.23 billion deal value. The conglomerate, whose businesses span energy systems and solutions, infrastructure systems and solutions, building solutions and other segments, has selected the investor group as its preferred bidder from a pool of 10 potential partners.

Bain Capital LP, Blackstone Inc. and CVC Capital Partners Ltd. were considering bids as well, according to media reports.

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Asia gets biggest slice of investment pie

Asia-Pacific-based companies received the highest private equity investment in 2022, accounting for 62.4% of the total as of Nov. 14. This was more than twice the investments received by their North American counterparts, which raised 30.8% of the total transaction value.

"The Greater China region continues to be a significant player in the global industry, even if cross-border capital flows are under pressure," Joyce said. "In particular, the region's venture capital market remains sizable, and the growth equity market is also comparatively large. Given China's net-zero commitments, these types of investments are also very popular in the region."

Recent transactions involved Chinese companies such as Baobi New Energy, Guangzhou Jianghai Technology Co. Ltd. and Xi'an Singularity Energy Technology (Shanghai) Co. Ltd., which received venture funding in October.

Greenr Global Pty Ltd., trading as Get Greener, an Australian developer of carbon offset consumer application, received seed round funding from venture capital firm RealVC and National Australia Bank Ltd. during the month. Indian renewable energy solutions provider Carbon Masters India Private Ltd. completed a funding round with investors including Schneider Electric Energy Access, Sangam Ventures, Indian Angel Network Services Pvt. Ltd., Nativelead Foundation, Schneider Electric Energy Access Asia and Bharat Founders Fund.