MDT Technologies: Reducing Emissions and Aligning with the EU Taxonomy

MDT Technologies (“MDT” or “the Company”) is a leading manufacturer of smart building products which enable energy efficiency in both residential and commercial properties, using the KNX standard. The KNX standard is a globally recognised protocol for home and building controls which integrates systems within a single network. It facilitates the automation and management of diverse building functions, offering flexibility, interoperability and efficiency in smart building solutions.

With headquarters and a central manufacturing facility close to Cologne, Germany, the Company has produced electrotechnical products for more than 40 years, specialising in smart building automation since 2009. At present, MDT produces more than 500 high-quality KNX products and was awarded the TOP 100 innovation prize for German SMEs for the eighth consecutive year in 2023.

IK Partners (“IK”) acquired a majority stake from MDT’s founders in March 2020, with a view to developing the business and expanding internationally. Since then, MDT has shown strong growth, entered more than 20 markets outside of Germany and increased full-time employee numbers by over 60%.

Following the acquisition, an independent ESG review was conducted by leading environmental consultancy ERM. This identified:

• The promotion of energy management and the energy savings potential enabled by smart home automation as key value creation opportunities; and
• Product compliance, supply chain management and business ethics as key value protection levers.

These topics became key areas of focus for us when working with MDT and they were woven into IK’s roadmap for development and value creation within the Company. As a result, MDT made performance improvements by adopting relevant policies and management practices.

IK supports MDT with EU Taxonomy (“the Taxonomy”) alignment efforts, which reaffirm its position as a sustainable business in a market where attractive sustainable investment opportunities are limited. The Taxonomy is a standardised classification of economic activities that are scientifically proven to contribute to environmental goals.

These efforts also support the professionalisation of the business and align its policies and processes with company growth, while improving competitiveness and meeting the sustainability-related requirements of clients and employees.

The Buildings sector represents approximately 35% of energy-related EU emissions [1] and regulators continue to place a strong emphasis on the reduction of GHG emissions and energy usage in buildings, seeking to achieve carbon neutrality in Europe by 2050. Through the optimisation of systems such as heating, ventilation, air conditioning and lighting, MDT’s smart building automation products, based on the KNX standard, enable energy savings of up to 50% [2].

Leveraging the energy-saving potential of MDT’s building automation products and the Company’s mission to increase awareness of these features and contribute to the “green agenda”, IK and MDT initiated a process of alignment with the EU Taxonomy.

With support from PwC, the eligibility check indicated that 90% of MDT’s revenue comes from building automation products identified by the Taxonomy as major contributors to climate change mitigation – significantly above the Industrials sector average (22% of revenue) [3].

Together with ERM and IK’s ESG team, MDT worked on implementing and documenting its alignment with the EU Taxonomy, through the following actions:

• Assessed product circularity, including durability and other features. MDT’s products are highly durable and designed to last more than 10 years.
• Introduced a waste management process for all relevant categories.
• Developed a traceability database to monitor substances of concern in MDT’s supply chain.
• Screened biodiversity risks and introduced a water management plan.
• Conducted a climate risk and vulnerability assessment.
• Strengthened governance through the implementation of policies such as Anti-Bribery and Corruption and Human Rights. The Company also established a grievance mechanism should the need arise.
• Conducted a human rights risk assessment across operations and the supply chain. MDT is working to establish due diligence and risk management processes proportionate to its size, leverage and risks identified.

[1] Greenhouse gas emissions from energy use in buildings in Europe (2023)
[2] KNX Energy Management (2021): Energy Efficiency with KNX
[3] EU Taxonomy Maximisation for MDT Technologies by Strategy& and PwC (2022)

In 2022 and as part of the IK carbon footprint project with external partner South Pole Group, MDT started monitoring scope 1 (direct) and 2 (indirect) greenhouse gas (“GHG”) emissions, extending this to cover scope 3 (indirect, value chain) emissions in 2023.

Emissions reduction opportunities were identified and science-based targets (“SBTs”), in line with the Paris Agreement, were set and approved by the Science Based Targets initiative in 2022, also contributing to IK’s own portfolio SBT target set and validated in 2022. The Company made a commitment to reduce scope 1 and 2 emissions by 42% between 2021 and 2030 and in 2022 alone, emissions were reduced by nearly 40% through a shift to green electricity.

Even as MDT has pursued a comprehensive decarbonisation agenda, the Company has also fully delivered on the many other aspects of IK’s full potential plan and shown a strong growth in topline and EBITDA thus far.

IK continues to support MDT with further decarbonisation initiatives and has defined additional steps, which are already in the pipeline.