IIGCC launches first net zero guidance for private equity portfolios

The comprehensive guidance, covering metrics, targets, and implementation actions relevant to GPs and LPs, offers an industry-wide approach to net zero.

The new private equity component, published by the Institutional Investors Group on Climate Change (IIGCC), is a new component for the Paris Aligned Investment Initiative (PAII)’s Net Zero Investment Framework (NZIF).

The component provides a blueprint for GPs to make and implement net zero commitments and allows LPs to incorporate private equity in net zero strategies for multi-asset class portfolios.

The addition of this new component is part of a strategy of continued expansion of the NZIF, following its initial launch in March 2021. The component brings the asset classes covered to five: listed equity and corporate fixed income, sovereign bonds, real estate, and private equity.

The NZIF outlines a common set of recommended actions to maximise efforts to achieving net zero emissions globally by 2050 or sooner, including guidance for the scope of portfolio companies to be considered for measurement and management.

Further guidance is provided for the metrics and targets to measure alignment over time, and the implementation actions to achieve alignment targets and decarbonisation in the real economy.

For LPs, the new private equity component is designed to be integrated with the broader recommendations of the Net Zero Investment Framework 1.0 to allow the asset class to be incorporated in net zero strategies for multi-asset class portfolios for the first time.

Stephanie Pfeifer, CEO, IIGCC, said: “This is an important step in bringing private markets – an ever-expanding and influential part of financial markets – in line with public markets. 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.”

“Ultimately, the more asset classes that can be incorporated into net zero analysis and strategy, the better chance asset owners and managers have of delivering real-world impact.”

Fabio Ranghino, Partner and Head of Strategy & Sustainability at Ambienta, said: “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.”

Bryn Gostin, Managing Director and Head of Product Development & Strategy and chair of Responsible Investment Committee at Capital Dynamics said: “The Net Zero Investment Framework for private equity is a catalyst for driving change towards a sustainable future.”