The Institutional Investors Group on Climate Change (IIGCC) has published new net zero private equity guidance aiming to standardise target setting, engagement and reporting between limited partners (LPs), general partners (GPs) and portfolio companies to support progress towards net zero at scale.
The guidance – Net Zero Investment Framework Component for the Private Equity Industry – forms the private equity component of the Net Zero Investment Framework, the most widely used net zero framework for investors, IIGCC stated.
It provides a ”global and cohesive framework” for pursuing net zero in the private equity industry, with an emphasis on achieving decarbonisation of portfolio companies, it added.
IIGCC had support from Ceres and Anthesis in developing the guidance, which is intended to assist any private equity investors who are active in buyout, growth, and associated strategies.
It 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, IIGCC continued. In doing so, the guidance aims to catalyse climate-related action across the private equity industry.
Misa Andriamihaja, private equity lead at IIGCC, said: “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 at Ceres, added: “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.”
He noted that these private equity-backed companies, which number more than 15,000, three times the size of the US listed market, will be “the public companies of the future” that contribute to the clean energy transition.
“They need a decarbonisation 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,” he said.
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