Timothy Gardner, David French

(Reuters) – Bluesource and Element Markets are two privately-owned providers of carbon credits and other services to businesses looking to combat climate change.

According to the companies, the combined entity will be owned by TPG Inc’s impact investing arm. It will also be North America’s largest marketer and originator of carbon credits and other environmental credits.

This merger highlights the potential for consolidation within the market for ESG (environmental, social, and corporate governance) consulting services. Providers seek to increase their scale in response to growing investor demand and the increasing demands of climate-conscious companies.

Bluesource is supported by GEF Capital. It advises businesses on how to lower their carbon footprint using offsets.

TPG’s Impact Investing arm holds a majority of Element. This company helps businesses produce renewable energy and provides carbon and other emission credit. The use of renewable natural gas is an alternative to gas taken from the ground, which can cause greenhouse gases such as methane and other pollutants. It’s made from wastewater and manure.

The financial details of the transaction were not disclosed. According to the parties, NGP Energy Capital Management will have a share in the company.

“We are seeing the carbon market follow what has happened in the information and data industries, where the model is moving towards providing services, rather than products, to companies to achieve their carbon reduction goals,” said Element Chief Executive Angela Schwarz, who will also lead the combined company.

Bluesource co-founder Bill Townsend will serve as chief strategy officer for the new company. The combined firm will have around 150 employees.

Townsend said, “The sector we are currently in is still changing and we hope it will shape its future.”

Bluesource announced in October that it has formed a joint venture worth $500 million with Oak Hill Advisors, a private equity firm. This will allow them to acquire timber forests for offset programs.

According to Element’s website, 20% of North American renewable gas markets are held by Element and Smithfield Foods is among their clients.

Marc Mezvinsky (business unit partner, TPG Rise), the TPG fund that backs Element, stated, “When I look outside, I don’t see any other pure-play carbonization business like ours.”