Volution - investing for climate action
- Graeme Kyle
- Nov 7
- 6 min read
Why climate-focussed equity investors might want to take a look at Volution.
Synopsis
Track record in climate action. Volution has a strong track record in climate action. It boasts impressive green credentials, including the London Stock Exchange Green Economy Mark, the FT Europe Climate Leaders award, and full SBTi approval for its near- and long-term emission reduction targets.
Products lead to lower emissions. The group develops and manufactures a wide-ranging and growing portfolio of indoor air management products, making airtight buildings a practical proposition and cutting the amount of energy needed to heat such buildings. Lower energy use means lower GHG emissions from the built environment.
Attractive investment proposition. Climate investors seeking to diversify from renewable energy might want to consider Volution. The shares offer financial quality, consistent growth, and reasonable valuation. The current price of 635p gives a forward PER of 18.1x and a PEG ratio of 1.5x
Investment analysis
Volution plc is a FTSE 250 company that manufactures a range of branded and OEM ventilation products to improve indoor airflow and air quality. It operates in the UK, Europe, and Australasia, supplying residential and, to a lesser extent, commercial markets.
Over the last 3 years, the group has established its green credentials, and its emission targets were submitted to and approved by SBTi in 2025. Management states that it is among just 14% of FTSE 250 companies with full SBTi accreditation for its near and long-term emission reduction targets.
Volution enjoys high underlying operating margins (FY25A: 22.3%) and ROIC consistently above its cost of capital (FY25A underlying ROIC 25.2%). It operates with moderate financial leverage (FY25A net debt/equity ratio = 72%), and management boasts a long track record of investing shareholder capital in organic growth projects and value-accretive acquisitions.
Volution shares offer the investor the 'holy trinity' of quality, growth, and reasonable value. The current share price of 635p implies a forward PER of 18.1x (using consensus earnings for FY26) and this translates into a PEG ratio of 1.5x based on the long-term EPS growth rate of 12.2%.
Green credentials may be under-rated by investors
Volution has held the LSE Green Economy Mark since 2021, which is only available to companies with over 50% of revenues from green products (further details on the Green Economy Mark can be found here). According to the LSE, 71% of Volution’s revenues are derived from green products and services. Indeed, we expect this percentage to rise further over the next five years as Volution widens its suite of low-carbon products, through both organic growth and M&A initiatives. Of Volution’s FTSE 250 building materials peers, only Genuit has also been awarded the Green Economy Mark.
Volution’s climate-related disclosures are comprehensive. It complies with the latest FCA TCFD recommendations, and in 2025 its science-based targets were confirmed by SBTi as meeting its Net-Zero Standard and Near-Term Target criterium (click here for full details).
Emissions audit and SBTi approved targets
Figure 1
*Scope 1 and 2 carbon intensity (tCO2e/£m of revenue; location based)
Company data: 2034 and 2050 targets approved by SBTi in 2025
Figure 2
Figures 1 and 2 show that Volution’s Scope 1 + Scope 2 carbon intensity has fallen by 38% in the last 5 years (broadly in line with the FTSE 250 building materials sector average of 43%) and by 65% in the period 2015-2025. Management’s SBTi-approved targets indicate that carbon intensity is expected to decrease by 15% from 2025 to 2034 and by 61% from 2025 to 2050.
Regarding Scope 3, we think that external factors, primarily the decarbonisation of national electricity grids, are key to emission reduction. Management states that 83% of Scope 3 emissions are due to the power consumed by Volution products (extractor fans and other electrically driven products) over their useful life. The rising penetration of renewable electricity in Volution’s end markets will, therefore, enable Scope 3 reductions in itself. Indeed, rapidly rising penetration rates could help Volution achieve net zero earlier than planned. Volution primarily operates in markets with progressive climate legislation, which provides support for the growth of renewable energy.
We also point to Volution’s recent acquisitions, whose products enable Scope 3 reductions in the built environment. For example, the heat exchanger cells business ERI (acquired in September 2021) supplies its products to heat recovery ventilation markets. Similarly, i-Vent (acquired in 2023) designs and manufactures decentralised heat recovery products.
Pathway to Net Zero
Figure 3
Volution’s “Pathway to Net Zero” (Figure 3) supports its SBTi-approved emission reductions. Targets along the route include: i) 75% of revenue from sales of low-carbon and heat recovery products by 2026 (2025: 71.2%); ii) 100% electrification of transport fleet by 2030; and iii) the removal of natural gas as an energy source at all UK sites by 2040.
The most effective way to reduce GHG emissions from a building is to improve insulation, as it retains heat and reduces energy consumption. An unintended consequence, however, is the development of ‘airtight buildings’, which can lead to stagnant indoor air that is prone to harbouring harmful viruses and volatile organic compounds (VOCs). Volution’s products are designed to alleviate such issues through the passive and active management of airflow in a building, with an increasing number of products controlled by intelligent technology. Legislation is supportive. The UK Building Regulations (2021), Section F, and Awaab’s Law (2025), as well as the Healthy Homes Act (2017) in New Zealand, highlight society’s demands and the political will for effective air management in residential buildings. We expect Volution to capitalise on what we think could be a multi-decade demand trend.
Increasing the use of recycled plastics is one of Volution's key Sustainability KPIs. Measured as a percentage of all plastics used in products, this reached an all-time high of 84% in 2025 (2024: 78%) and is expected to rise to 90% by 2026. As a comparison, FTSE 250 peer Genuit, which also targets this measure, is currently at 52%.
Management has defined “active reductions” in GHG emissions and distinguished them from passive or externally driven reductions. We like this approach - it ensures management actions are measured independently from external developments (both positive and negative) that are typically beyond its control. A good example on the positive side is the rising penetration of green energy tariffs.
Volution’s green capex programmes over the last three years have included investing in energy-efficient tooling (UK) and in plastics recycling machinery (Europe).
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