Hg, Intermediate Capital Group and four other private equity firms have received approval for their emissions reduction targets by the Science Based Target initiative.
The six firms – Astorg, Bregal Investments, FSN Capital, Hg, Intermediate Capital Group and Investindustrial – have set near-term decarbonisation targets for their own operations and portfolio companies. ICG’s commitment to net zero “covers 100 percent of our relevant investments… [and] sets a clear roadmap for the next decade and beyond”, said Benoit Durteste, ICG’s chief executive and chief investment officer.
SBTi has released specific criteria for private equity firms, which includes setting decarbonisation targets for control investments in firms’ portfolios. EQT became the first private equity firm to receive approval in October. Five other firms – Altor Equity Partners, Eurazeo, Montagu Private Equity, Tikehau Capital and Triton Partners – have committed to following SBTi’s guidance for setting decarbonisation targets, with a view to receiving approval within two years.
SBTi is “setting the standard for PE firms that want to commit to credible carbon reduction targets and the businesses we invest in”, said Matthew Brockman, managing partner at Hg, in a statement.
SBTi sets sector-specific targets and pathways for businesses to reduce their greenhouse gas emissions in alignment with the Paris Agreement goals to limit global warming to between 1.5C and 2C. For private equity, firms follow SBTi’s criteria to set Scope 1 and 2 decarbonisation targets for their own operations and portfolio companies where they have control investments. Firms submit these to SBTi for approval. Approved firms must annually report their Scope 1 and 2 emissions and their progress against these targets.
The PE criteria has been developed with technical advice from the UN PRI, Initiative Climat International and an expert advisory group that includes individuals from other private equity giants such as Allianz Capital Partners, Blackstone, CVC, Coller Capital, LGT Capital Partners and Permira – “with in-depth knowledge in science-based target setting for the private equity industry”, SBTi said in an emailed statement. SBTi released draft criteria for private equity firms in August, and EQT became the first private equity firm to receive approval in October.
“We urge private equity firms to engage with the guidance and encourage them to adopt the portfolio coverage method for control investments,” said Fiona Reynolds, chief executive of the UN-backed Principles for Responsible Investment.
Financial institutions’ net-zero targets will face increased scrutiny following COP26. Members of the Glasgow Financial Alliance on Net Zero – with $57 trillion in combined assets under management – must set interim emissions reduction targets and implement engagement policies and action plans to achieve these. UK companies will be required to disclose their transition pathways under proposed legislation by chancellor Rishi Sunak.
SBTi’s PE expert advisory group:
Allianz Capital Partners; Altor; Anthos Fund & Asset Management; Astorg; Blackstone; Berkshire Partners; Bregal Investments; BSR; Coller Capital; CVC; Deloitte LLP; EcoAct; EMK Capital; EQT; FSN Capital Partners; Hg; ICG; Investindustrial; Leaders for Climate Action; LGT Capital Partners; PAI Partners; Permira; Principles for Responsible Investment; PwC; Schneider Electric; SUSI Partners; TowerBrook; Triton Partners; Tufts University