Private Equity Gets New Emissions Reporting Standard

Private equity investors could soon have a more stable and consistent method of assessing greenhouse gas (GHG) emissions after a new reporting standard was introduced this week.

Initiative Climat International (ICI) — a collaborative group of private equity managers and investors — has partnered with sustainability consultancy group ERM to develop the reporting standard.

The standard applies two existing frameworks — the GHG Protocol and the Partnership for Carbon Accounting and Reporting Standard — to the private equity investment industry.

Investors in private equity are increasingly pressuring general partners to reveal climate-related data and establish goals for the reduction of GHG emissions. However, many lack the facilities to measure these criteria and some data models are patchy and inconsistent.

Tom Reichert, CEO of the ERM Group, said: “The sector can play a significant role in helping its portfolio companies to deliver on their climate commitments, but for that to happen we need globally accepted standards.

“The application of this standard will enable a more consistent and streamlined approach to the calculation and disclosure of emissions, and will support private equity firms as they seek to understand and drive down emissions across their portfolios.”

The new standard will act as a means of providing GPs with a way of improving disclosures through data collection and processing methods as well as goal setting. It will help managers calculate portfolio company emissions and attribute them accurately at a portfolio level to support reporting to limited partners.

Peter Dunbar, head of private equity for the UN’s Principles for Responsible Investment, which has supported the work, said: “When it comes to measuring and reporting financed emissions, the private equity asset class remains a distance behind public markets.

“This excellent guidance will equip private equity ESG professionals with a blueprint based on preexisting global standards, which will help them improve the quality of their GHG emissions reporting.”