Private Markets Decarbonization Roadmap
Four lessons from companies that follow the Private Markets Decarbonization Roadmap
Four lessons from companies that follow the Private Markets Decarbonization Roadmap
Our recent survey of investors conducted with the Initiative Climat International (iCI) and the Sustainable Markets Initiative’s Private Equity Task Force (PESMIT) found that although a large majority of investors (95%) have begun to collect decarbonization data from their portfolio companies, only 65% say they are driving action with portfolio companies (and 58% with deal teams).
Through our work with dozens of industry leaders on applying the Private Markets Decarbonization Roadmap, and in accelerating decarbonization outcomes in individual portfolio companies, we have identified a set of best practices that can help investors avoid getting stuck in the data-collection phase:
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Map your starting point and define your strategy
The PMDR provides a helpful structure for mapping your starting point. Where in your portfolio can you have the largest relative or absolute decarbonization impact? Are there laggards you need to bring up to a minimum level? Are there leaders you can help accelerate and use as an example for others?
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Set targets and make commitments
Whether internal-only or also externally communicated, defining a clear ambition helps focus your efforts and define the required timeline. There are multiple third-party target-setting frameworks that can be used to structure commitments, but strategy and targets can also be tailored to fund-specific needs, reflecting a range of pathways companies can take to make real progress.
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Embed across the organization
Data visibility and tracking is only one step in the decarbonization journey. Having a clear view of the end goal clarifies the capabilities that deal teams and portfolio company management teams will need and can help you integrate progress into existing processes—for example, by linking incentives to outcomes
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Support portfolio company management
Decarbonization is still a new skillset for most portfolio company management teams. Finding the right tools to help them get past roadblocks—whether through playbooks, the right network of industry advisors, or sharing success stories and best practices across the portfolio—can often be critical to maintaining progress.
About the PMDR
About the PMDR
Until recently, there was no common language for understanding and discussing the decarbonization evolution of an investor’s portfolio that was applicable across asset classes and approach to decarbonization. A group of investors led by iCI and PESMIT and supported by Bain & Company came together over the course of 2023 to fill that gap. We developed the PMDR with input from more than 250 GPs, LPs, and ecosystem players to provide a common language for private market firms to communicate the decarbonization status and evolution of their portfolios. The response has been highly favorable: The recent survey of 57 PESMIT and iCI members showed that 82% of those surveyed have either already mapped their portfolios along the PMDR or plan to do so in 2024. GPs are using the roadmap mainly to inform their internal strategy (92%), to disclose progress individually to investors (58%), and to support internal communications (48%).
