U.S. special purpose acquisition companies, or SPACs, are targeting companies with high environmental, social, and governance characteristics.
According to Nomura Greentech data, U.S. IPOs by SPACs with a focus on ESG or sustainability, along with those in sectors including environmental technology, transportation, industrials, water and energy, accounted for 49 out of a total of 306 deals in the first four months of 2021, Reuters reports.
In comparison, U.S. IPOs by SPACs with a focus on ESG or sustainability only amounted to 40 in the second half of 2020.
Looking at transaction so far in 2021, 32 SPAC mergers with ESG firms have been announced, compared to 31 for all of 2020. The value of the deals so far this year, at $117 billion, is already more than 2.5 times that raised for all of 2020, and makes up 38% of total SPAC merger volume, compared to 25.3% in the second half of 2020.
There have been three major factors that have helped drive the greater attention for ESG growth, including lower costs due to technology and innovation, customer demand for sustainable products and services, and strong policy support, Jeff McDermott, Head of Nomura Greentech, told Reuters.
“With over 50 active ESG SPACs currently seeking targets, and more still to price this year, we believe… investors will continue to fund high growth ESG companies,” McDermott said.
Attention on companies with strong ESG attributes has increased as policymakers make the low-carbon economic transition to combat climate change a key focus. President Joe Biden has affirmed his commitment to steer the U.S toward a net-zero carbon footprint, which has fueled investment flows into renewable energy.
ESG SPACs have also been outperforming. A Reuters analysis revealed that the top 10 ESG SPACs have generated a return of 4% so far this year, compared to a decline of 0.2% for non-ESG SPACs, on average.
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