Investors using a framework developed under the auspices of the Institutional Investors Group on Climate Change (IIGCC) to implement net-zero emission commitments are set to have guidance covering private equity.
The asset class was not so far covered by the Paris Aligned Investment Initiative (PAII’s) Net Zero Investment Framework (NZIF), which already addresses listed equity and corporate fixed income, sovereign bonds and real estate.
The IIGCC is consulting on the private equity component until 27 February, with the final guidance lined up to be published in the second quarter of 2022.
IIGCC said the NZIF component is the first to be relevant to both GPs and LPs and covers scope and implementation in addition to metrics and targets.
It said the new private equity component was designed in a way that meant the asset class could be incorporated in net-zero strategies for multi-asset class portfolios for the first time.
“The Net Zero Investment Framework has already proven extremely valuable in helping us assess our listed equities portfolio against our stated net zero strategy,” said James Turner, investment manager at Railpen. ”We are delighted that for the first time we will soon be able add the asset class of private equity to our analysis.”
Stephanie Pfeifer, chief executive officer at IIGCC, said the group looked forward to seeing how many GPs adopt and are able to use the private equity components as a blueprint to make and implement net zero commitments.
“Ultimately, the more asset classes that can be incorporated into net zero analysis and strategy, the better chance asset owners and managers have of delivering real-world impact,” she said.
The consultation on the NZIF private equity framework comes shortly after the UN-convened Net-Zero Asset Owner Alliance published an updated target-setting protocol, which now includes infrastructure as an asset class in addition to incorporating other changes.
The Alliance is aiming to include private equity in an envisioned third version of the protocol, in 2023.
The PAII NZIF is used by signatories of the Net Zero Asset Managers initiative and more than 50 ”Paris Aligned Asset Owners”, from ABP to Wiltshire Pension Fund, outlining a common set of recommended actions, metrics and methodologies to maximise their contribution to achieving net zero emissions globally by 2050 or sooner.