Private equity-backed carbon offset vendors Bluesource, Element to merge By Reuters

By David French and Timothy Gardner

(Reuters) – Bluesource and Element Markets, two private equity-backed providers of products and services such as carbon credits to companies seeking to take action on climate change, said on Wednesday they had agreed to merge.

The combined entity will be majority-owned by the impact investing arm of alternative asset manager TPG Inc and will be the largest originator and marketer of carbon and environmental credits in North America, the companies said.

The merger underscores the potential for consolidation in the market for environmental, social and corporate governance (ESG) consulting services, as providers seek scale to meet growing demand from climate-conscious companies and investors.

Bluesource, which is backed by investment firm GEF Capital, advises companies on how to reduce their carbon footprint through the use of offsets and projects ranging from reforestation to wastewater treatment.

Element, in which TPG’s impact investing arm currently has a majority stake, helps companies produce renewable and also provides carbon and other emission credits. Renewable natural gas, generated from manure, landfills and wastewater, cuts emissions of a powerful greenhouse gas because it’s burned before it would naturally escape to the atmosphere and is used in lieu of natural gas extracted from the ground.

No financial terms were disclosed. NGP Energy Capital Management, another private equity firm, will also have a stake in the combined company, the parties said.

“We are seeing the carbon market follow what has happened in the information and data industries, where the model is moving towards providing services, rather than products, to companies to achieve their carbon reduction goals,” said Element Chief Executive Angela Schwarz, who will also lead the combined company.

Bill Townsend, co-founder of Bluesource, will be chief strategy officer in the combined company, which will employ around 150 people.

“The industry we are in is still evolving, and we hope to shape where it is heading,” added Townsend.

Bluesource unveiled in October a $500 million joint venture with private equity firm Oak Hill Advisors to purchase timber forests to be used in offset schemes.

Element accounts for 20% of the North American renewable natural gas market and counts Smithfield Foods, the world’s largest pork processor, among its clients, according to its website.

“When I look out there, I don’t see another pure-play decarbonization business like the one we’re creating,” said Marc Mezvinsky, business unit partner in TPG Rise, the TPG fund behind Element.

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