Private Equity has faced an assault on its ESG credentials over the past year — see for example an FT report this summer that suggested evidence is growing that Private Equity is “facilitating a rebellion against some of the progressive constraints of public company existence, particularly the growing demands of complying with standards on ESG issues” — even claiming it is playing an “obviously reactionary role” in snapping up stranded O&G production assets.
Now sustainable disclosure standards organisation the CDP has teamed up with private market investors managing $2.3 trillion of assets (including M&G, Neuberger Berman and Nuveen) to launch a new standardised disclosure platform that will let them benchmark private companies and compare like-for-like on environmental performance. CDP will also augment their self-reported data with emissions estimates, allowing private market investors to calculate financed emissions so that they can report against their own net-zero commitments.
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Claire Elsdon, joint global director of capital markets at CDP said: “This pilot is essential to avoiding ’emissions leakage’ between asset classes such as public companies selling high-carbon intense assets to private companies in a bid to avoid scrutiny and transparency. Stark warnings from the latest IPCC report that disastrous climate tipping points are nearing underline the urgency of this pilot’s work. We thank participating investors and look forward to scaling this work.”
The pilot was welcomed by early adopters including Coller Capital, one of the largest global investors in the private equity secondary market. Coller Capital Partner Adam Black said: “Encouraging more private companies to actively measure and disclose their carbon impacts (and also their water and possible deforestation impacts) is no longer a nice to have – it is essential to the low carbon transition. Moreover, it will better enable investors to make much more informed investment management decisions when it comes to private markets.”
Jennifer Signori, MD at Neuberger Berman added: “CDP’s initiative is seeking to provide guidance and tools for calculating emissions data to the private markets industry. We believe pragmatic tools will help investors understand and manage climate risks and support portfolio objectives in climate transition and solutions.”
