New net zero guidance for private equity published
- New private equity guidance establishes a consistent approach to measuring progress towards net zero with an emphasis on real economy decarbonisation of portfolio companies.
- Guidance aims to standardise target setting, engagement and reporting between LPs, GPs and portfolio companies to support progress towards net zero at scale.
- The guidance forms the private equity component of the Net Zero Investment Framework, the most widely used net zero framework for investors.
The new guidance – Net Zero Investment Framework Component for the Private Equity Industry – provides a global and cohesive framework for pursuing net zero in the private equity industry, with an emphasis on achieving decarbonisation of portfolio companies.
The guidance is intended to support any private equity investors who are active in buyout, growth, and associated strategies.
The development of the new guidance was led by IIGCC with significant support from Ceres and Anthesis. Select GPs and LPs representative of the market, including different strategies, geography and size, also provided inputs.
The guidance forms the private equity component of the Net Zero Investment Framework, taking the total number of asset classes covered to six.
Integrating climate change risk and opportunities in private markets
The guidance takes into account the unique characteristics of the private equity asset class and provides an avenue to progress the integration of climate change risks and opportunities into private equity investment. In doing so, the guidance aims to catalyse climate-related action across the private equity industry.
Misa Andriamihaja, Private Equity Lead, IIGCC, said: “We are pleased to bring to market this Net Zero Investment Framework component for the private equity industry. With this guidance, we sought to support LPs and GPs’ efforts, targets and actions in order to achieve real decarbonisation at the level of portfolio companies. Bespoke net zero target types and tailored engagement actions sit at the core of this game-changing guidance for all private equity investors to start and progress in their net zero journey.”
Peter Ellsworth, Senior Director, Ceres, said: “This guidance, developed with significant input from GPs and LPs, will provide investors involved in the private equity market with a practical roadmap for achieving net zero and also an on-ramp for LPs, GPs and their portfolio companies that would like to better understand what a pathway toward net zero looks like. These private equity-backed companies, which number more than 15,000, three times the size of the U.S. listed market, will be the public companies of the future that contribute to the clean energy transition. They need a decarbonization strategy they can develop in collaboration with their GPs. This guidance will promote such action and improve communication among all parties in this asset class.”
Peter Dunbar, Head of Private Equity, PRI, said: “The updated Net Zero Investment Framework for private equity offers a helpful blueprint for marshalling the private equity industry’s net zero efforts. Its emphasis on collaboration and science-backed decarbonisation offers a pragmatic path towards net-zero commitments in private equity. The input of an industry panel was a welcome addition which has helped ensure it meets the needs of a diverse industry. We encourage investors to consider the Net Zero Investment Framework as another methodology available to them as they consider making net-zero commitments.”
Fabio Ranghino, Partner, Head of Strategy & Sustainability, Ambienta, said: “I believe these guidelines will be a valuable support to all managers and owners willing to join our working group on this journey. Given the size and the complexities of the challenge we face, we need the entire industry to engage and thus we hope this contributes to mobilize investors.”
Bryn Gostin, Managing Director and Head of Product Development & Strategy and chair of Responsible Investment Committee, Capital Dynamics, said: “Capital allocators have the power to drive engagement on sustainability outcomes, particularly when they act with one directed voice. The new private equity guidance is a game changer in supporting LPs and GPs to work towards this.”
Barrett Lawson, Director, Investment Strategy and Services, Anthesis, said: “Finance has the power to be a critical enabler in accelerating climate action and transitioning to a low carbon economy. As outlined in the recent IPCC Synthesis Report, there is a rapidly closing window of opportunity to secure a liveable and sustainable future for all. The Net Zero Investment Framework Component for the Private Equity Industry guidance provides a practical approach for private equity to be an important catalyst for change in the transition.”
IIGCC brings the investment community together to work towards a net zero and climate resilient future. We create change the world needs by unlocking investor action on climate change.
Our work supports investors in generating returns for clients and beneficiaries, which in turn provides financial wellbeing for future generations. We work with our members to address climate risk and ensure they are well positioned to make the most of investment opportunities offered by climate mitigation and adaptation efforts, ensuring that their investments contribute towards a better world for us all to live in.
Our team supports investors to create practical solutions that can make a real difference in tackling climate change – providing guidance and support on investment practices, policies and corporate behaviours that have real impact and deliver change that the world needs. For more information visit www.iigcc.org and @iigccnews
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through our powerful networks and global collaborations of investors, companies, and nonprofits, we drive action and inspire equitable market-based and policy solutions throughout the economy to build a just and sustainable future. For more information, visit ceres.org and follow @CeresNews
Ross Gillam, Head of Media Relations, IIGCC
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Barbara Grady, Senior Communications Manager, Ceres