Heidi DuBois, global head of ESG at AEA Investors, 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?
The establishment of the ESG Data Convergence Initiative (EDCI) was a game-changer for the industry. With over 250 participating LPs and GPs, representing $25 trillion in AUM, EDCI demonstrated broad industry backing and the ability to serve as a trusted home base for high-quality industry benchmarks across sectors, company size and markets. The remarkable degree of partnership between LPs and GPs has laid the foundation for continued growth and success.
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?
We have made considerable progress this year, with firms continuing to move from the “whether” to the “how” of reducing emissions. We are seeing a variety of approaches, ranging from net-zero goals at the portfolio level to company-by-company reduction approaches. The industry has some distance to travel given the variety of measurement techniques and constraints on scaling of decarbonization technologies, but the resources dedicated to developing and implementing solutions have grown over the past 12 months.
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?
In 2023, we are looking to complete our second annual greenhouse gas footprint assessment. Having two years of data will give us more information as we consider where to focus time and resources regarding deployment of solutions with proven ROI.
Aside from climate, which other areas of sustainability will be prominent on your agenda and why?
Diversity remains a top priority at both the firm and across our portfolio, and we have a variety of initiatives in place dedicated to supporting DE&I to promote an inclusive environment for all and contribute to business success. Earlier this year we announced a joint venture with Amateras, a women-owned and -led investment firm that deploys seasoned female investing and operational talent across private credit and equity. Through Amateras AEA, we seek to drive value creation and shift the gender paradigm in investing.
How are more emerging topics like nature/biodiversity occupying your time and resources?
Investors seem to be drilling down more on climate risk in situations where it has the potential to impact the value creation model. Climate risk has implications for the quality and availability of the natural capital that many businesses rely on to operate and grow. As modelling of climate risk continues to improve and the potential impacts of climate change become better understood, I believe we’ll see an increasingly broad range of climate topics considered in the investment process.