Investors Launch Private Equity Climate Guide

Today investor groups have launched a new guide to climate change. The document, A Guide on Climate Change for Private Equity Investors, is aimed at private equity limited partners (LPs) and general partners (GPs). The updated guide contains information including how to measure carbon emissions and policy changes in line with the Paris Agreement.

Speaking about the guide Tom Murley, Director at HG Capital and Chair of the investor working group that produced the guide, said: “With growing awareness of climate change, it is increasingly important to institutional investors that they can assess the climate investment risks and opportunities in their portfolios, both in listed companies and in private equity. 

“Historic environmental due diligence, focused on compliance and liabilities, does not address these new risks. Therefore, most of the world’s leading investors, including private equity limited partners, are incorporating climate risk in manager selection. 

“For private equity this means how managers identify, manage and report on climate risks and opportunities in their investment and portfolio management processes.  Ensuring the LP and GP interests are aligned on climate issues will become a key factor in screening GPs seeking to raise new capital.”

Stephanie Pfeifer, CEO of IIGCC, added: “Asset owners are demanding greater consideration of climate change opportunities and risks by their internal investment teams and external managers, in both listed and unlisted investments. This updated guide for private equity investors sets out a range of practical ways to address the transition to a low carbon economy through better engagement with all parts of the investment supply chain with a focus on improved monitoring, management and reporting.”

The guide updates IIGCC’s 2010 A Guide on Climate Change for Private Equity Investors. It is aimed at institutional investors who are limited partners (LPs) in private equity funds or private equity fund managers, general partners (GPs) managing these funds. It explains:

– The changing policy background set to follow from the Paris Agreement

– The way investment-grade climate policies are beginning to materialise in Europe and other countries

– How to measure carbon emissions in private equity investment

– How to engage across the investment supply chain to reduce carbon asset risk in this asset class

– How to seek out low carbon investment opportunities.

Fiona Reynolds, Managing Director of PRI said: “We are delighted to partner with the IIGCC to revisit and update their pioneering 2010 guidance on climate change for private equity investors. A timely follow-up to COP21, the guide provides a means to harmonise LP and GP approaches at a time of unprecedented investor momentum on climate change.”

James Holley, UK Head of Responsible Investment at KPMG, who co-ordinated the drafting of the guide on behalf of the investor working group, added: “Now that climate change is recognised as a material risk across many asset classes, consultancy firms are being asked increasingly by clients to support them address these issues in a more transparent manner. Likewise, these same clients are looking closely at a wide range of new opportunities emerging in low carbon technology. This guide will help private equity investors enhance their understanding of the latest climate-related regulatory and market trends and provide them with some practical examples on how to integrate these issues into their routine investment decision making.”