Private markets firms zero in on SBTi validation

An increasing number private markets firms are engaging with the Science Based Targets initiative to validate their decarbonisation strategies.

The SBTi was founded by CDP, the UN Global Compact, World Resources Institute and the World Wide Fund for Nature in 2015. It launched the net zero standard ahead of COP26, which provides a “framework for corporate net-zero target setting in line with climate science”. It released additional guidance aimed at private markets firms in 2022.

For a company’s targets to be validated, it must first complete the seven forms available on the SBTi website. The body’s validation team then assesses the targets to ensure they are compliant with SBTi criteria and aligned with climate science.

European private equity and credit investor Permira became the latest firm to have its targets validated last week. The firm has committed to reducing the Scope 1 and 2 emissions of its direct operations by 70 percent by 2030. ESG head Adinah Shackleton – one of New Private Markets’ sustainable private markets influencers – told us last month that the firm had already been “operationalising” the target prior to validation.

EQT was the first firm to have its net zero target validated, in 2021, and was shortly followed by a handful of others including InvestIndustrial, Bregal Investments and Astorg. Schroders, parent company of Schroders Capital and Blue Orchard, had its targets validated in 2022.

Other private markets firms are also looking at SBTi as the next stage of their ESG strategies. Mid-market German private equity firm Genui, for example, has made it a top priority for the year ahead to ensure it is on track to achieve its SBTi targets. Oakley Capital, another mid-market private equity investor, is “following the development of Science Based Targets, and other decarbonisation initiatives” with a view to getting on a decarbonisation pathway “in the near future”, said Aga Siemiginowska, head of sustainability.

Ambienta committed to the initiative late last year, describing SBTi as “a robust and transparent framework recognised internationally as a standard” for decarbonisation strategies.

As well as manager-level targets, some firms are looking to develop specific plans for their portfolio companies. Under the SBTi’s private equity requirements, portfolio companies and assets should develop their own 1.5 degree aligned-decarbonisation pathways. Such pathways include net-zero and interim targets for the company or asset to be consistent with a net-zero world by 2050.

Permira is aiming for 35 percent of its eligible portfolio companies to set SBTi-validated targets by 2027, and 100 percent by 2040. So far, seven portfolio companies have had their targets validated, with another seven having committed to the validation process.

EQT, meanwhile, is now looking to have carbon reduction targets validated for 40 percent of its portfolio by 2025, according to head of transformation Bahare Haghshenas.