Environmental Project Spending Trends: Opportunities and Risks in the Global Engineering Consulting Sector

DBRS Morningstar released a commentary titled "Environmental Project Spending Trends: Opportunities and Risks in the Global Engineering Consulting Sector.” This commentary argues that global engineering consulting firms are taking on different levels of risk as they position themselves to benefit from the favourable global trends in environmental project spending growth. DBRS Morningstar defines three strategies being pursued to this end.

(1) Firms like Stantec Inc. and Arcadis NV that are expanding on existing areas of environmental project expertise are choosing a relatively lower-risk path.
(2) Companies like WSP Global Inc. that are making consequential acquisitions, such as Golder Associates Inc., are choosing a riskier approach because of the integration and financial risks involved.
(3) Companies like Worley Limited, John Wood Group PLC, and KBR, Inc. that are pursuing the development of new technologies such as carbon capture and sequestration to satisfy their customers’ energy transition demands are pursuing what is arguably the most risky strategy, but ultimately with the greatest potential rewards. As United States Special Presidential Envoy for Climate John Kerry said on May 16, 2021, “I’m told by scientists that 50% of the reductions we have to make (to get to near zero emissions) by 2050 or 2045 are going to come from technologies we don’t yet have.”

“Despite the varying degrees of risk, we are confident that global engineering companies having the expertise and relationships with both public and private clientele will benefit from this trend going forward,” according to Tim O’Brien, Senior Vice President, Diversified Industries.