News & Analysis

In brief: Energy transition ‘generating new risks and imperatives for PE portfolios’, says Bain

A future in which portfolio companies are required to decarbonise poses 'a real risk for GPs', according to Bain's annual report.

-

GPs are under pressure from investors and regulators to establish clear emissions-reduction strategies, according to a new report on the PE landscape from Bain & Company.

The report highlights that private companies have historically been under less pressure to reduce their carbon footprint than public ones. This is now changing as regulation of companies’ Scope 1 and 2 emissions becomes more common. Proposed SEC regulation requiring public companies to disclose Scope 3 emissions is also set to impact private suppliers upstream.

Bain recommends that managers and portfolio companies ask themselves the following questions when formulating their decarbonisation approach:

  • What’s the potential downside of doing nothing about our carbon exposure?
  • How can we bring upside to the carbon challenge in the normal course of due diligence and value creation?

The report contains a case study of a telecoms company’s decarbonisation journey and is worth a read.