Turning environmental funding constraints into opportunities

News - 3/25/2019

By developing a new integrated model for environmental assets (recycling, boilers, water treatment plants, etc.), our specialist environmental infrastructure Private Equity strategy offers an innovative resource management solution for industrial players and local authorities.

Against a backdrop of increased public awareness concerning environmental challenges (climate change, the energy transition and the circular economy), resource management (water, energy and waste) has become a key issue for European industrial players – who are the primary users of water and electricity – and local authorities alike.

In the last 25 years, the European Union has implemented a series of laws aimed at limiting industrial pollution. This new regulatory framework raises the level of ecological and environmental standards and imposes more controls on the management of natural resources. Today, it is estimated that more than 50,000 industrial sites in Europe are affected. Moreover, the modernisation of towns and industries requires investment of more than EUR 150 billion.

Faced with these new modernisation requirements and limited by financial constraints, industrial players and local authorities are increasingly outsourcing the management of their environmental infrastructure. We are transitioning from a model where each industrial player owned their own water treatment plant, boiler and water production to a model where a grouping of industrial players pools its assets with resources being managed by a global operator.

Whilst these synergies enable improved technical performance, they also help optimise economic performance. This results in the increased competitiveness of European industrial players on the global stage, which contributes to job creation and sustainable economic growth.



In addition to economies of scale, this new way of managing resources provides significant benefits to the environment. By delegating water management, energy production and waste recovery to a single player, real synergies providing efficiency and better performance from sites are then possible. The implementation of this kind of strategy facilitates contribution to the development of the circular economy by taking pressure of natural resources (thanks to the optimisation of industrial processes) and reducing greenhouse gas emissions through the development of renewable energy alternatives and waste recovery.

At Edmond de Rothschild we have a dual role, as we offer financial and industrial know-how. Thanks to our specialist environmental infrastructure Private Equity strategy, we can provide the capital needed to carry out these new projects and we can also fulfil the role of the assembler: we help select the technologies to be implemented and help choose the manufacturer and operator. We thus compensate for the lack of investment capabilities of industrial players and create a new virtuous financing model for European infrastructures. By developing this strategy, we are managing construction risk and, moreover, we are ensuring stable cash-flows in the long-term.

By concentrating our efforts on assets that are aimed at producing environmental value-added in the long-term, whether that be producing renewable energy, reducing greenhouse gas emissions, waste recovery or water management, we are helping support the energy and environmental transition whilst offering a sustainable solution in the face of climate challenges.