Church of England Pension: Private markets are behind public markets on climate change

Private markets managers need to up their game on climate data access and reporting to LPs, according to the Church of England Pensions Board.

“The environmental, social and governance plumbing that enables us to sit above detailed disclosures is not there in private markets, so we are relying heavily on GPs and our relationships and conversations with GPs to get the kind of data that we need,” said Stephen Barrie, deputy director of ethics and engagement at the Church of England Pension Fund, during a panel at PEI’s Responsible Investment Forum: Europe on Thursday.

For public markets investments, LPs can get third-party verified data from credible sources, however, private markets are “five or six years behind” public markets on this front, Barrie said.

“The climate initiatives I see in private markets tend to be about sharing good practice rather than systemic assessments across private equity that allow us to make relevant useful comparisons between a private portfolio with lots of GPs and underlying companies and our public portfolio.”

Barrie noted the “information asymmetry” that exists whereby GPs tend to expect “unlimited data access to their portfolio companies and at an early stage” but LPs don’t get systemic data.

“I expect that asymmetry to be addressed because as LPs we want to be able to say at the portfolio level – covering both private and listed assets – that we are, for example, net zero aligned.”

The £2.8 billion ($3.7 billion; €3.1 billion) pensions board has a 12 percent exposure to infrastructure, 6 percent in private debt and an undisclosed but “new and growing” private equity mandate with Cambridge Associates, according to Barrie. Pension funds administered by the board include the Church of England Funded Pensions Scheme, the Church Administrators Pension Fund and the Church Workers Pension Fund, according to its website.

The fact that PE-owned companies tend to be smaller than publicly listed ones is no reason to ignore climate risk, noted Barrie: “PE business models tend to want small companies to become big companies or at least to be bought by big companies … I don’t think we should see PE as completely disconnected from the climate demands that public markets are under.”

Emmanuel Parmentier, a partner at advisory firm INDEFI, conducted the fireside chat with the Church of England Pensions Board.