IIGCC publishes PE net-zero guidance

The Institutional Investors Group on Climate Change (IIGCC) has published the final version of its Net Zero Investment Framework (NZIF) guidance for the private equity industry.

The industry-specific framework component was originally released for consultation in February 2022, reportedly the first set of guidelines of its kind relevant to GPs and LPs.

The main difference between the 2022 consultation and the newly published guidelines is the broader view of the industry that the updated version takes, aiming to reflect the responsibilities of LPs, GPs and portfolio companies.

It supports any private equity investors that are active in buyout, growth and associated strategies.

Climate change combatters
The guidance was developed with significant support from sustainability non-profit Ceres and ESG service provider Anthesis Group. Several key stakeholders, including GPs and LPs from varying strategies, also contributed to its development.

Now, the NZIF comprises six asset classes: private equity, real estate, sovereign bonds, liquid equity, corporate fixed income, and infrastructure.

Main focus areas include target implementation guidelines, recommended engagement action, economy decarbonisation of portfolio companies, and reporting between LPs, GPs and portfolio companies.

Peter Ellsworth, senior director at Ceres, commented: “This guidance will provide investors involved with a practical roadmap for achieving net zero and also an on-ramp for LPs, GPs and their portfolio companies that would like to better understand what a pathway toward net zero looks like. These private equity-backed companies, which number more than 15,000 – three times the size of the US listed market – will be the public companies of the future that contribute to the clean energy transition. They need a decarbonisation strategy they can develop in collaboration with their GPs.”

Peter Dunbar, head of private equity at PRI, added: “The updated NZIF for private equity offers a helpful blueprint for marshalling the private equity industry’s net-zero efforts. Its emphasis on collaboration and science-backed decarbonisation offers a pragmatic path towards net-zero commitments in private equity. We encourage investors to consider the Net Zero Investment Framework as another methodology available to them as they consider making net-zero commitments.”