Private markets managers and investors are making progress when it comes to portfolio decarbonisation. This message comes through loud and clear in our Agenda 2025 series, in which sustainable private markets professionals spell out their priorities for the year ahead.
Revaia, a Paris-based venture capital fund, says it now has carbon footprint assessments for 83 percent of its portfolio companies, and more than half have already started taking action to reduce carbon emissions.
“Our next priority is to actively engage these companies in a robust decarbonisation journey,” says Revaia’s head of sustainability, Bettina Denis. “This involves defining and implementing initiatives that align with the Paris Agreement’s objectives and support long-term, science-based targets for emissions reduction.”
Business Growth Fund, a UK-based growth investor, is currently developing its net-zero plan, having now gathered “a good couple of years of baseline data”, says ESG consultant to the firm Fiona Place.
“Many” of Actis’s portfolio companies “have completed their footprints and are developing business plans, which are due to be finalised in early 2025,” says director of sustainability James Magor. “We also need to formally codify sectoral-level decarbonisation approaches and automate data collection, reporting and analytics to help accelerate this process. We’re continuing to synthesise ongoing work across climate risk, transition-alignment and decarbonisation planning into transition plans, with a focus on real-world decarbonisation.”
Among Permira’s private equity portfolio companies, 17 now have commitments to science-based targets. Momentum is building “as companies increasingly see requirements for SBTs in customer contracts”, says its ESG head, Adinah Shackleton.
Foresight Group is enhancing its data collection capabilities to allow portfolio companies to calculate Scope 3 emissions. “This will not only improve the data quality we receive but will also be a key tool to help our SME portfolio navigate this topic and unlock business opportunities as a result,” says Fiona Hatch, investment director and private equity team sustainability lead at Foresight. “Success will be increasing the proportion of our portfolio that calculates carbon emissions from source data and the successful rolling out of the Scope 3 calculation feature.”
Always be prepared
Beyond the important steps of measurement and reduction, firms are also increasingly turning their attention to scenario planning, resilience, adaptation and climate solutions investments as part of their decarbonisation roadmaps.
“Looking ahead to 2025, the focus will shift to adaptation and transition within climate themes,” says Schroders Capital climate specialist Holly Turner, who notes that “the importance of physical climate risk has risen, prompting enhanced geospatial analysis in real assets, with plans to extend this risk assessment to other asset classes.”
Permira has been developing a framework for assessing climate and transition investment opportunities, says Shackleton: “In H1, our priority is to develop an avoided emissions methodology to complement this.”
Our conversations suggest that the rubber is starting to hit the road when it comes to real world decarbonisation of private markets-owned assets. GPs who find themselves falling behind should take note and consider accessing industry resources to speed up.
