INSIGHT by IIGCC
〉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.
“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.”
-Misa Andriamihaja, Private Equity Lead, IIGCC
“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 Ellsworth, Senior Director, Ceres
“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.”
-Peter Dunbar, Head of Private Equity
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
