Private equity funds

Private Equity Funds are specialized secondary intermediaries that take a direct equity stake in companies or assets on behalf of clients or partners. They are likely to have a higher risk appetite than most asset managers and provide capital to recipients in a mid or late stage of growth.

Responding entities tracked


Criteria

Responding Private equity funds Tracked

Institutions by number

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Institutions that are joining the “Paris race,” by making a commitment to any level of action under any of the three dimensions (Targets, Integration, Flows). Depending on which Criteria is selected, this trend shows the number of institutions or the total assets they represent (USD billion).

How many institutions are joining the “Paris race”, by making a commitment to any level of action under any of the three dimensions. Depending on which is selected, this trend shows the number of institutions or the total assets they represent (USD billion).

The number of private equity funds reporting responses to Paris alignment has rapidly increased in recent years particularly within the targets and integration dimensions. Most widespread progress is in integration measures, although scores there are just below targets. By comparison, only a small number of institutions have made low-carbon investments, and none have measured their portfolios.

The number rose from 7 institutions in 2015 to 66 in 2020. This represents companies with total core assets of over USD 219 billion, while total assets in the UK private equity industry are USD 294 billion. Reporting institutions’ total assets increased more rapidly in later years, suggesting larger funds have been slower to respond.

Trends By Dimension


Criteria

Targets

Distribution

Institutions by number

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Distribution of integration scores for the selected institution category. Gradations in each bar represent different levels of response (ranging 0-100 from “Initial response” to “Advanced response”). The distribution can be based on the number of institutions or their underlying assets (USD billion).

Distribution of targets scores for the selected institution category. Gradations in each bar represent different levels of response (ranging 0-100 from “Initial response” to “Advanced response”). The distribution can be based on the number of institutions or their underlying assets (USD billion).

Reliability

Target drivers

*based on average nr or AUM of reporting entities in the last 5 years

AVERAGE SCORE

Avg by number of institutions

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The green line indicates the average integration score (0-100 from “Initial response” to “Advanced response”) for the selected institution category. The average across institutions can be calculated as simple average of scores or weighted by the assets of covered entities. The dotted line indicates the score of the single institution emerging as the category’s “early leader.”

The green line indicates the average targets score (0-100 from “Initial response” to “Advanced response”) for the selected institution category. The average across institutions can be calculated as simple average of scores or weighted by the assets of covered entities. The dotted line indicates the score of the single institution emerging as the category’s “early leader.”

Reliability

Target drivers

*based on average nr or AUM of reporting entities in the last 5 years

Private equity funds are increasingly engaging with Paris alignment at a strategic level. Their number increased ten-fold in five years after the Paris Agreement: 56 reported in 2020.

However, almost 90% of funds have only shown an initial response. Most funds score between 20 and 30. The average score among private equity funds in 2020 was 22, or 25 weighted by assets. Since 2019, a small number have shown a developed response, accounting for 35% of assets. These larger institutions, though late movers, have pulled ahead of some of their peers.

Early leaders are Stafford Capital Partners, which started reporting in 2019 with a score of 42, followed by Bowmark Capital scoring 38. These two leaders have set the example for other equity funds to follow, principally through setting a climate strategy at the overall institution level. For the most part, targets scores for private equity funds are driven solely by raising awareness and committing to influence other actors in the system.

Integration

Distribution

Institutions by number

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Distribution of integration scores for the selected institution category. Gradations in each bar represent different levels of response (ranging 0-100 from “Initial response” to “Advanced response”). The distribution can be based on the number of institutions or their underlying assets (USD billion).

Distribution of targets scores for the selected institution category. Gradations in each bar represent different levels of response (ranging 0-100 from “Initial response” to “Advanced response”). The distribution can be based on the number of institutions or their underlying assets (USD billion).

Reliability

Integration drivers

*based on average nr or AUM of reporting entities in the last 5 years

AVERAGE SCORE

Avg by number of institutions

Chart Bar

The green line indicates the average integration score (0-100 from “Initial response” to “Advanced response”) for the selected institution category. The average across institutions can be calculated as simple average of scores or weighted by the assets of covered entities. The dotted line indicates the score of the single institution emerging as the category’s “early leader.”

The green line indicates the average targets score (0-100 from “Initial response” to “Advanced response”) for the selected institution category. The average across institutions can be calculated as simple average of scores or weighted by the assets of covered entities. The dotted line indicates the score of the single institution emerging as the category’s “early leader.”

Reliability

Integration drivers

*based on average nr or AUM of reporting entities in the last 5 years

Like in the case of targets, the number of private equity funds integrating climate change into decision-making increased more than ten-fold from 2015 to 2020, rising to 65 reporting institutions in 2020.

On average, private equity funds have shown only initial responses since 2015, with almost 90% of companies scoring between 0-30. In 2020, private equity funds scored on average 12, or 21 weighted by assets. There is a significant gap between the average and early leaders Actis, scoring 55, followed by Coller Capital (51), and Earth Capital (49).

There is room for improvement on some of the more developed climate tools available to investment firms, such as climate scenario tools and climate risk due diligence, which only a handful of funds have adopted. The main drivers for the average private equity integration score are commitment to shareholder engagement and reporting on climate progress.

Flows

INVESTMENT TRENDS

USDm *2019-2020 data is incomplete

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Bars show the volume of transactions in primary low-carbon and climate-resilient investments, and green bond issuances. Figures are always expressed in USD million.

Sources: BNEF, CBI, CPI, NAZCA, RAN

Reliability

Flows drivers

*based on average nr or AUM of reporting entities in the last 5 years

PORTFOLIO ALIGNMENT

Institutions by number

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Distribution of institutions based on the assessment of the share of their investment portfolios exposed to climate-critical sectors as either aligned or misaligned with Paris goals. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: FFD, FinanceMap, TPI

Reliability

Flows drivers

*based on average nr or AUM of reporting entities in the last 5 years

Private equity funds have made some, but relatively limited, low-carbon investments. However, project-level investment showed an increasing trend from 2016 to 2018, after which point data is not available. One institution, Actis, used a project vehicle to issue green bonds, with an issuance of USD 250 million in 2020. No institutions reported the alignment of their portfolios, no doubt linked to the scant take-up of climate measures in investment decision-making processes.

TRENDS BY INDICATORS


Targets indicators


Awareness of climate change

awareness of climate change

Institutions by number

Chart - How to read

Distribution of institutions that have announced a clear commitment to addressing climate change through their activities, thereby raising awareness for action on climate risks or goals. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: PRI, TPI or activity tracked under other indicators (adoption of mitigation targets, investment and divestment goals, activity to influence actors in the system).

Reliability

Adoption of quantified mitigation targets

Adoption of quantified mitigation targets

Institutions by number

Chart - How to read

Distribution of institutions that have set clear targets for climate action (primarily reducing their emissions), whether those are quantitative targets or general, and whether they are disclosed transparently. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: SBTi, ERI, NAZCA, WMB, TPI, NZAOA, PRB

Reliability

Mitigation targets by type

Institutions by number

Chart - How to read

Distribution of institutions that have set a target, by type of target adopted. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: SBTi, NAZCA

Reliability

Adoption of investment goals

ADOPTION OF INVESTMENT GOALS

Institutions by number

Chart - How to read

Distribution of institutions that have set and disclosed clear, accountable and measurable targets to provide a volume of financial services and investments for climate action. The distribution can be based on the institutions by number or their underlying assets (USD billion).

Sources: WRI

Reliability

AGGREGATE INVESTMENT GOALS

USDm

Chart - How to read

Bars show the cumulative volume of investments that institutions have committed to in goals at the organizational level. Figures are always expressed in USD millions.

Sources: WRI

Reliability

Adoption of divestment goals

Adoption of divestment goals

Institutions by number

Chart - How to read

Distribution of institutions that have announced a clear target to divest from fossil fuels, with a clearly defined scope. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: DivestInvest, FFD

Reliability

Adoption of institutional strategy on climate change

Adoption of institutional strategy on climate change

Institutions by number

Chart - How to read

Distribution of institutions that have set an institution-level strategy to incorporate climate change risks and opportunities, including investment or decarbonization plans. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: PDC, PRI, TPI, CAFI, PRB

Reliability

Influencing actors in the system

Influencing actors in the system

Institutions by number

Chart - How to read

Distribution of institutions that are engaging with government and industry on climate change. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: InfluenceMap, World Economic Forum / Mission Possible, BEI, IA, SAS, PSI, PRI, NZAOA, WMB, TPI

Reliability

Integration indicators


Disclosure of climate risks

Disclosure of climate risks

Institutions by number

Chart - How to read

Distribution of institutions that have committed to the disclosure of climate risks and, if so, whether the level of disclosure has been assessed and can be considered sufficient. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: AODP, PRI, TCFD, CA 100+, WMB

Reliability

Emissions reporting

Emissions reporting

Institutions by number

Chart - How to read

Distribution of institutions that have committed to disclose their emissions, and whether there is evidence that emissions are already been tracked internally. Emissions that are verified or cover the full range of activities (scope 1, 2, and 3) are here considered of higher quality. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: TPI, PCAF, PRI

Reliability

Climate progress reporting

Climate progress reporting

Institutions by number

Chart - How to read

Distribution of institutions that are committing to provide, or providing regular updates on measures implemented, and actions taken.

Distribution can be based alternatively on the number of institutions or their underlying assets (USDbn).

Sources: SSEI, CAFI, PSI, WRI, PRB, NZAOA, WMB, PRI

Reliability

Carbon price

CARBON PRICE

Institutions by number

Chart - How to read

Distribution of institutions that have committed to an internal carbon price to inform their decision making, have already adopted one, or transparently disclosed one to the public. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: CDP, CPLC, TPI, WMB, NAZCA

Reliability

CARBON PRICE RANGE ADOPTED

Institutions by number

Chart - How to read

Distribution of institutions that adopted and disclosed a carbon price, by actual carbon price range. The distribution can be based on the number of institutions or their underlying assets (USD billion), while the carbon price range is expressed in USD/tCO2.

Sources: CDP

Reliability

Climate scenario tools

Climate scenario tools

Institutions by number

Chart - How to read

Distribution of institutions that integrated temperature and climate scenario tools to support decision making, and the level of sophistication of the scenario used. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: PRI, TPI

Reliability

Climate risk due diligence

Climate risk due diligence

Institutions by number

Chart - How to read

Distribution of institutions that have adopted internal climate risk due diligence and related procedures, distinguishing between organizations that so far committed to do so and those that have already put measures in place, and the degree at which they are integrated across the operational and strategic levels of the organization. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: PRI, TPI, CAFI

Reliability

Climate-related accountability

Climate-related accountability

Institutions by number

Chart - How to read

Distribution of institutions that have adopted measures for climate accountability, looking at the extent of accountability and incentives for chief and operations-level staff, and at the existence of dedicated staff responsible for coordinating climate action. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: PRI, TPI, SSEI

Reliability

Shareholder / client engagement

Shareholder / client engagement

Institutions by number

Chart - How to read

Distribution of institutions that have committed to engaging shareholders or clients on climate action, or that are taking the necessary steps by mandating climate reporting requirements or through active ownership. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: PRI, PRB, SSEI, 2Di FM, CA 100+

Reliability

Flows indicators


Investment trends

Investment trends

USDm *2019-2020 data is incomplete

Chart - How to read

Bars show the volume of transactions in primary low-carbon and climate-resilient investments, and green bond issuances. Figures are always expressed in USD million.

Sources: BNEF, CBI, CPI, NAZCA, RAN

Reliability

Portfolio alignment

PORTFOLIO ALIGNMENT

Institutions by number

Chart - How to read

Distribution of institutions based on the assessment of the share of their investment portfolios exposed to climate-critical activities as either aligned or misaligned with Paris goals. The distribution can be based on the number of institutions or their underlying assets (USD billion).

Sources: FFD, FinanceMap, TPI

Reliability

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