Navigating the Energy Transition: A Private Equity Perspective

Private equity firms face growing pressure to navigate the energy transition. Strategic investments in carbon-tracking technology and data-driven due diligence are essential for long-term success.

Private equity firms face increasing pressure to decarbonize their portfolios amidst global shifts away from carbon-based fuels. With rising calls for change from regulators, consumers, investors, and B2B customers, fund managers are now focusing on the risks and opportunities within their portfolios.

Investing in the energy transition is challenging, given its vast scope and industrial complexity. However, investors are drawn to opportunities in renewables and clean industries, with billions invested in energy transition-related deals.

To target the right companies, investors need strong due diligence informed by deep expertise in specific subsectors. Factors like regulation, subsidies, and technology must be considered. Companies supplying data and tools for carbon tracking and management, like Persefoni and Watershed, are becoming attractive investments.

Due diligence should also assess market growth potential and the impacts of technology improvements and regulatory changes. Investors must distinguish between companies merely embracing decarbonization for PR and those with clear emissions-reduction strategies that adhere to standards.

Private equity firms can use their unique approach to create value within the energy transition. Investing in companies supplying data and tools to competitors, rather than picking winners, can be profitable. For example, businesses developing battery technology are essential, regardless of which automaker dominates electric vehicles.

Object-centric process mining can help private equity firms navigate the complexities of the energy transition. It allows for better analysis of data related to carbon emissions, regulatory compliance, and operational efficiency. By understanding and optimizing processes, firms can identify opportunities for cost savings, emissions reductions, and risk mitigation.

In summary, private equity firms must proactively address the energy transition within their portfolios. Due diligence, tailored investment strategies, and a focus on value creation in areas like carbon tracking technology can help firms thrive in a changing landscape. Process mining offers valuable insights into complex processes, aiding in cost reduction and emissions management as the world shifts away from carbon-based fuels.