Driven by the emerging impacts of climate change and social upheaval, environmental, social, and governance (ESG) factors are garnering an ever-growing amount of investors’ attention. Many investors are increasingly applying these non-financial factors in their analysis process to identify risks and growth opportunities. With businesses facing growing pressure to apply ESG principles to their operations, consulting firms are making moves to strengthen their advisory capabilities in this sector, with one leading management and consulting company recently acquiring a Swedish sustainability consultancy.
McKinsey & Company announced its purchase of Material Economics in a December 2021 press release. The acquired company focuses on climate change and circular transformations across advanced industries, helping companies develop sustainable strategies, operational processes, and the delivery of complete sustainability transformation programs. The acquisition is something of a homecoming, as the company founder and both co-partners all previously worked for McKinsey.
The acquisition is part of an ongoing strategy of sustainability-focused purchases by McKinsey, with the purchase of Material Economics being its third acquisition of an ESG company in 2021. The firm seeks to grow its in-demand sustainability practice via strategic acquisitions, accelerating its capabilities to assist clients in ESG planning and execution.
“The transition to a sustainable future is the biggest challenge of our time and has in recent years become a priority issue for many, if not all, of our clients. Assignments related to sustainability are today one of our largest business areas and we are now seeing how the transition is gaining momentum in large companies, among investors, and in start-up companies,” said Sebastian Sjöberg, who leads McKinsey in Sweden.
Beyond acting as a means of improving the lives of everyday people, ESG has turned into big business in recent years, with global investment in 2021 topping out at $120 billion, more than double the $51 billion invested in 2020. Employees and customers alike are placing a growing level of importance on ESG when choosing companies to work for and purchase from, and businesses are certainly feeling the pressure. By expanding its ability to advise in ESG matters, McKinsey is positioning itself as a trusted advisor to clients looking to make a positive impact on the world.