Carmela Mondino, head of ESG and sustainability at Partners Group, 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?
Inflation is back! In 2022, the world we knew with low interest rates and low inflation disappeared. As we continue to adjust to this new environment, the industry’s commitment to ESG is likely to be tested. It will therefore become even more important for managers to stay focused and prioritize the most material ESG factors for each of their portfolio companies, in order to achieve financial returns while still creating value for stakeholders.
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?
Last year, we saw carbon emissions decoupling from GDP growth for the first time, which suggests there is no trade-off between achieving climate goals and delivering on returns. The number of members of iCI grew significantly, and a new North American charter was created, among other regions, indicating global intentions to have a positive impact on climate. But we need to start executing. It is great to have companies and managers making pledges, but time is ticking, and we need results.
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 are moving on three fronts: execution, coverage and scenario analysis. On the execution side, we have asked all our portfolio companies to measure their carbon footprint and develop a plan to reduce it. This needs to be in line with the Paris Agreement and Partners Group’s own commitment to reduce the emissions of controlled assets by at least 20 percent during ownership. We have good coverage across private equity and private infrastructure and are finalizing details to increase this for our real estate portfolio. Finally, we are looking into how to systematically embed scenario analysis into our investment processes.
Aside from climate, which other areas of sustainability will be prominent on your agenda and why?
We see ESG as Planet, People, and Prosperity. These are all connected, but climate is clearly associated to Planet. As the macroeconomic backdrop becomes more challenging, we need to focus more on People and creating value in the long run. This partly involves DE&I initiatives and increasing employee ownership. Private markets firms have been working on employee ownership and engagement for some time now but there is still more to do. Forging ahead on DE&I and ownership is also very important for ensuring you have access to the best possible talent.
How are more emerging topics like nature/biodiversity occupying your time and resources?
For now, these topics are a focus as a consequence of climate change. We are looking into ways of integrating it into our thinking, but for now we are focusing on reducing our contribution to climate.