IIGCC Shines Light on PE Blind Spot

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    Stockholm (NordSIP) – The Institutional Investors Group on Climate Change (IIGCC) launched on 2 February new comprehensive guidance to help private equity on the path to net-zero. Adding this component to the Net Zero Investment Framework (NZIF) brings the asset classes covered by the initiative to five: listed equity and corporate fixed income, sovereign bonds, real estate, and now private equity. Apart from providing a blueprint for general partners (GPs) to make and implement net-zero commitments, the new component allows limited partners (LPs) to incorporate private equity in net-zero strategies for multi-asset class portfolios.

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

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    The NZIF, used by signatories of the Net Zero Asset Managers initiative and the Paris Aligned Asset Owners, outlines a common set of recommended actions, metrics, and methodologies to maximise their contribution to achieving net-zero emissions globally by 2050 or sooner. The new private equity component will be instrumental for GPs with regards to delineating the scope of portfolio companies to be considered part of a net-zero strategy. It also provides valuable guidance for measuring alignment over time and implementing the alignment targets to achieve decarbonisation in the real economy.

    The extended NZIF will be beneficial for LPs as well. A common framework will enable asset owners and managers with multi-asset class portfolios to seamlessly integrate private equity in their overall net-zero strategies.

    “The Net Zero Investment Framework for private equity is a catalyst for driving change towards a sustainable future,” comments Bryn Gostin, Managing Director and Head of Product Development & Strategy and chair of Responsible Investment Committee at Capital Dynamics. “The guidelines address how GPs and LPs can take meaningful action in aligning investments with the goals of the Paris Agreement and turn pledges into practice.”

    The proposed private equity guidance is now open for public consultation until 27 February 2022, with the final component expected to be published in Q2 2022.

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    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.
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