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IIGCC publishes net zero guidance for PE

by Krystal Scanlon 2 February 2022

The Institutional Investors Group on Climate Change (IIGCC) has produced guidance towards net zero for private equity portfolios at GP and LP level. The new component for the Paris Aligned Investment Initiative (PAII)’s Net Zero Investment Framework (NZIF) is open for public consultation until 27 February 2022, with the final component expected to be published in Q2 2022.

It aims to outline a common set of recommended actions, metrics and methodologies to maximise firms’ contribution to achieving net zero emissions by 2050, if not earlier.

Together with this new component, the NZIF now covers five asset classes including private equity, real estate, sovereign bonds, liquid equity and corporate fixed income. The revised guidance is designed to be integrated with the broader recommendations of the NZIF 1.0, for LPs with multi-asset class portfolios.

Private equity guidance

The guidance is believed to be the first of its kind to be relevant to both GPs and LPs, covering scope and implementation as well as metrics and targets:

  • Scope of portfolio companies to be considered for measurement and management as part of a net zero PE strategy
  • Metrics and targets to measure alignment over time
  • Implementation actions to achieve alignment targets and decarbonisation in the real economy.

The latest addition to the framework was developed by an IIGCC-led working group, which is co-led by Bryn Gostin, managing director, head of product development & strategy at Capital Dynamics and Fabio Ranghino, partner & head of sustainability & strategy at Ambienta. The group used input from the PAII’s partner networks and their PE-focused members.

Stephanie Pfeifer, CEO of IIGCC commented, “When it comes to net zero, private equity is currently a blind spot for institutional investors. We look forward to now seeing how many GPs adopt and are able to use the private equity components as a blueprint to make and implement net zero commitments.”

Ranghino added, “The proposed approach has tried to consider the practical complexities of implementing net zero strategies across the breadth of the private equity sphere and provide actionable suggestions to market participants. We think all GPs, across stages and sizes, should benefit from the guidelines produced and embark with us on the net zero journey, as it requires everyone to contribute.”

Stakeholders can submit feedback on the Framework and responses to questions via the online platform available here.

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