Supported by Bain & Company, the PMDR provides private markets firms with a common language to communicate their portfolio’s decarbonisation status.
London, 6 November 2023 - The Initiative Climat International (iCI) and the Sustainable Markets Initiative’s Private Equity Task Force, supported by Bain & Company, today announced the launch of the Private Markets Decarbonisation Roadmap (PMDR) to support global private markets firms (General Partners or ‘GPs’) with a common language and approach to speak about decarbonisation.
As the implications of climate change and the resulting need to transition to a low-carbon economy shape the private markets industry, GPs face a series of challenges: data scarcity, unclear pathways to net zero and increasing polarisation on considering decarbonisation when making investment decisions. To address this, the PMDR is a comprehensive communications approach across asset classes, including buyout, infrastructure, private credit and secondaries, to support more effective analysis and objective-setting by creating greater transparency on the current state of decarbonisation in a given investor’s portfolio. Through its Alignment Scale, the PMDR proposes an industry-consistent approach and criteria to classify portfolio companies along the decarbonisation trajectory, with the intent to incentivise real action.
The Alignment Scale addresses three essential questions that determine how GPs should classify portfolio companies:
- What measures has the company taken to reduce greenhouse gas emissions?
- Is there a recognised transition pathway for this company?
- Do the company’s operations enable the net-zero transition?
The GP can track and disclose the company’s decarbonisation progress over time, and its role in the low-carbon transition, offering flexibility in how GPs can disclose decarbonisation performance, using metrics that are most relevant to their context.
The PMDR is the result of a large-scale collaboration and consultation process, including input from more than 250 general partners, limited partners (LPs) and sustainability organisations globally. Consultation partners include Carbon Disclosure Project (CDP), Ceres, Glasgow Financial Alliance for Net Zero (GFANZ), The Institutional Investors Group on Climate Change (IIGCC), Institutional Limited Partners Association (ILPA) and Principles for Responsible Investment (PRI). At its core, the PMDR has been a collaborative effort to translate high-level target-setting frameworks on decarbonisation and net zero into a workable and simple approach to classification and disclosure, for GPs by GPs. The resulting guidance complements existing decarbonisation alignment and target-setting frameworks, while supporting GPs who are at the earlier stages of their decarbonisation journey.
“The private equity industry is uniquely positioned to accelerate progress on reducing emissions given its strong value creation capabilities,” said Marc Lino, a Bain & Company partner who leads global environmental, social and governance (ESG) efforts for the firm’s private equity practice. “Privately-owned companies lag public companies in disclosing and reducing emissions, leaving value on the table, given the opportunity for decarbonisation to enhance operational excellence, increase valuations and mitigate risks. This new roadmap provides an agenda-setting opportunity for the private equity industry.”
Bain & Company is supporting the initiative in partnership with the iCI and the Sustainable Markets Initiative’s Private Equity Task Force.
“It is clear that private equity funds will benefit from a common approach to address their decarbonisation efforts,” said Serge Younes, Global Net Zero Lead at iCI and Head of Sustainability at Investindustrial. “Important work is being done at a portfolio level, but there lacks a widely adopted industry framework for disclosing and analysing this activity.”
To arrange an interview or for any enquiries, please contact:
Kelly Sapp, Chief Industry Communication Officer, Sustainable Markets Initiative
Joseph Cockerline, Senior Communications Specialist, PRI
Phone: +44 (0)20 3972 3474
iCI is a global, practitioner-led community of private markets firms and investors that seek to better understand and manage the risks associated with climate change.
iCI’s members share a commitment to reduce carbon emissions of private equity-backed companies and secure sustainable investment performance by recognising and incorporating the materiality of climate risk. In practice, this implies a commitment to effectively analyse and manage climate-related financial risk and GHG emissions within their portfolios, in line with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). Members commit to sharing knowledge, experience and best practice, working together to develop resources that will help standardise practices across the industry.
Over 250 member firms with collectively USD4.3 trillion of assets under management (as of October 2023) have joined the iCI. The initiative is formally endorsed by the PRI, is a Supporting Partner of The Investor Agenda, and enjoys fruitful partnerships with CDP and Ceres, and private equity and venture capital associations BVCA and France Invest.
About the Sustainable Markets Initiative’s Private Equity Task Force
Founded by His Majesty King Charles III in 2020, as Prince of Wales, the Sustainable Markets Initiative has become the world’s ‘go-to’ private sector organisation on transition. Launched in 2021, the Terra Carta serves as the Sustainable Markets Initiative’s mandate with a focus on accelerating positive results for nature, people and planet through real economy action.
The Sustainable Markets Initiative’s Private Equity Task Force launched in 2021 and is the first ever CEO-level private equity working group established to discuss ways that the industry can effect change. It leverages expertise within each member firm across three priority areas: climate change, biodiversity and sustainability-related metrics.
For more information visit: www.Sustainable-Markets.org
About Bain & Company’s Private Equity Business
Bain & Company is the leading consulting partner to the private equity (PE) industry and its stakeholders. Private equity consulting at Bain & Company has grown thirteen-fold over the past two decades and now represents about one-quarter of the firm’s global business. Bain & Company maintains a global network of more than 2,000 experienced professionals serving PE clients. The firm’s practice is more than triple the size of the next-largest consulting firm serving PE firms.
Bain & Company’s work with PE firms spans fund types – buyout, infrastructure, real estate and debt, as well as hedge funds – and many of the most prominent institutional investors, such as sovereign wealth funds, pension funds, endowments and family investment offices. Bain & Company supports its clients across a broad range of objectives that include deal generation, due diligence, immediate post-acquisition, ongoing value addition, exit, firm strategy and operations, and institutional investor strategy.
For more information on Bain & Company, please visit www.bain.com/about/.