Private Equity Embraces Climate Solutions Through Thematic Investing

What's New: 

Summa Equity's founder Reynir Indahl reveals how his firm's thematic investing approach - focused on resource efficiency and tech-enabled transformation - is delivering superior returns while tackling environmental challenges. According to McKinsey's interview, Summa has built one of Europe's largest impact funds by targeting companies aligned with solving global problems rather than isolated industry sectors.

Why It Matters: 

As private equity faces fundraising and performance headwinds, this approach offers a new growth paradigm that directly addresses climate goals and advances circular economy models. By transforming undervalued "brown" assets into greener alternatives, PE firms create both financial and environmental value simultaneously.

Big Picture Drivers:

• Transformation of high-emission industries represents half of required CO2 reductions needed to reach net zero goals.

• Collaboration across value chains and asset classes accelerates change by reconfiguring partnerships beyond traditional supplier-customer relationships.

• Measurement shifts from ESG input compliance to quantifiable real-world impact outcomes.

• Timing requires identifying inflection points where systems rapidly change after periods of relative stability.

• Integration of mature businesses with new technologies creates profitable solutions that don't rely on subsidies or policy support.

By The Numbers:

• €230 billion investment needed for materials/waste ecosystem decarbonization by 2040 (just 0.1% of annual GDP)

• 6-7x potential return ($1-2 trillion value creation) from materials/waste transformation

• 55% potential emissions reduction in materials sector through available technology

• 80% potential European self-sufficiency in materials through circular approaches

• 500+ waste incineration plants in Europe requiring decarbonization solutions

Key Trends to Watch:

• Industry structure shifts may limit larger PE firms' ability to implement thematic approaches due to siloed organizational designs across different investment types.

• Undervaluation of high-emission businesses creates opportunities for value creation through decarbonization retrofits.

• Cross-asset collaboration between venture, growth, buyout, and infrastructure investments will accelerate implementation of systemic solutions.

• Public-private partnerships will increasingly facilitate the deployment of capital toward solving environmental challenges.

The Wrap: 

Thematic private equity investing represents a fundamental shift from isolated company improvement to system-wide transformation, delivering both competitive financial returns and meaningful environmental impact by targeting undervalued assets with decarbonization potential. This approach offers a blueprint for institutional investors seeking to align capital deployment with climate imperatives without sacrificing performance.