Private equity is poised to play a critical role in the transition to a clean energy economy.
With its model of taking significant stakes in companies, the rapidly growing, $6 trillion industry is uniquely positioned to directly drive decarbonization strategies in industries throughout the economy.
Private equity managers recognize the systemic risks of the climate crisis, along with the massive economic opportunities that the shift to a clean economy creates.
Both general partners who make direct investments in private companies and the limited partners who invest in those private equity firms want to figure out how best to measure and reduce portfolio company emissions.
One key obstacle to developing a decarbonization strategy is the lack of high-quality data for measuring emissions.
Based on extensive interviews with more than a dozen private equity general partners and limited partners, this report describes the strategies and best practices private equity investors are using to collect and report data on carbon emissions of portfolio companies and engage with portfolio companies.
Based on this practical insight, this report makes recommendations including:
Develop a process for prioritizing companies to engage with
Evaluate portfolio company climate expertise
Report scope 1 and scope 2 emissions to limited partners at the portfolio company level annually
Report scope 3 data as portfolio companies improve data gathering
Use the emissions reporting template as a basis for dialogue between limited partners and general partners
Consider using one of the 18 carbon accounting tools described in detail in the report.