Tang Zongzhong, head of sustainability at BPEA EQT in Singapore, reflects on the past year and looks forward to 2023.
Looking back at 2022, were there any pivotal events, moments or developments in terms of sustainability in private markets?
To me the most significant development was the increased scrutiny of asset managers’ sustainability claims. Regulators on both sides of the Atlantic cracked down on greenwashing, globally there was increased regulatory attention on strengthening standards, and LPs are asking ever more sophisticated questions.
This means that investors must treat sustainability more rigorously, just as we would treat any other financial or operational topic. Companies that recognise the importance of sustainability – and match this by devoting sufficient time and resources – will reap the rewards.
Thinking specifically about private markets, do you think the industry has made progress on climate in the last year? Where are the bright spots? Where has it disappointed?
A large number of private markets companies made climate pledges after COP26; acknowledgement of the challenge is a critical first step for many. We also saw increasing maturity when it comes to sustainability data disclosure.
With that said, it remains critical that private markets contribute to emissions reduction and climate solutions. This can be achieved by driving the transition towards renewable energy, improving energy efficiency of operations, and further investing in climate-related technologies. Unfortunately, the geopolitical situation has dented the energy transition, as volatile energy prices have temporarily hindered many companies’ shorter-term climate ambitions, but in the mid-term, we believe the shocks of 2022 will be an accelerant to climate action.
Looking ahead to 2023, what is your firm’s next priority in terms of the climate? What would you like to have completed over the next 12 months?
We will further refine and substantiate our net zero strategy, build on this year’s momentum to expand our support of companies in setting their own Science-Based Targets, and scale decarbonisation efforts across our portfolio. We will also further strengthen our sector-level decarbonisation expertise and the way we integrate the value of carbon and related risks in our investment processes.
Aside from climate, which other areas of sustainability will be prominent on your agenda and why?
Diversity will continue to be a focus area. EQT has diversity targets embedded in many of our sustainability-linked loans, and we see potential to build stronger teams in our portfolio companies through our diversity initiatives.
While we do have topics that we focus on across the board, we also take a materiality-based approach to make sure we improve on the most relevant sustainability topics for each company. This is key to creating value for our companies.
How are more emerging topics like nature/biodiversity occupying your time and resources?
EQT addresses environmental challenges from a broader resource scarcity perspective. An example is the tracking of water usage and waste to landfill across the portfolio. EQT is also collaborating with peers through the Private Equity Sustainable Markets Initiative Taskforce to explore and accelerate efforts around integrating biodiversity further into decision-making. We have also established an internal taskforce to drive actions and build expertise on the topic.