The iCI and Sustainable Markets Initiative’s Private Equity Taskforce (PESMIT) saw the need for Private Markets to accelerate progress on reducing emissions. They therefore wanted to develop a specific approach for Private Markets to make meaningful decarbonization progress, specific to their operational environment.

The PMDR is the result of a large-scale collaboration and consultation process with >250 organizations, including input from >200 general partners (GPs), >40 limited partners (LPs) and 10 broader ecosystem players globally.

Bain & Company is proud to have supported in developing the PMDR, running the consultation processes and gathering feedback to ensure a comprehensive and consistent approach.

The ambition of the PMDR is to be a common language between all Private Markets stakeholders, whilst drawing on and complementing existing net zero alignment and target-setting frameworks. The PMDR also covers a broad range of asset classes, including Buyout (primary focus), Growth, VC, Infrastructure, Private Credit and Secondaries. 

While there is no expectation of changes to the overall approach, we acknowledge climate standards and regulation is a quickly evolving space, and we expect the PMDR to be a living document that evolves alongside standard practice. 

PMDR 2.0 addresses key insights and feedback from adopters and industry stakeholders, all while safeguarding the core framework.

Key enhancements encompass:

• Asset-class specific considerations: Additional guidance for Growth, Venture Capital (VC), and Real Estate assets establishes asset-class specific ambition levels, decarbonization levers, and related modifications to the Roadmap. This is complementary to existing asset-class specific guidance for Infrastructure, Private Credit and Secondaries
• Decarbonization Enabler classification: Clearer process on how to manually assess assets with economic activities enabling the net zero transition when no sustainability taxonomy is applicable
• Avoided Emissions: Conceptual commentary on the topic of Avoided Emissions in the Appendix
• PMDR Support Tool & visualizations: A new Excel-based Support Tool enables portfolio classification and disclosure of key insights internally and/ or externally through automated visualizations directly in Excel or through PowerPoint templates. The tool also provides flexibility on Scope 3 data, allowing GPs the option to communicate initial progress based on Scope 1 & 2 emissions only

The above themes are accompanied by smaller updates across the Roadmap, supporting ease-of-use and further clarity.

The PMDR is entirely voluntary – it is designed to provide a common language for funds to describe their decarbonization activities, designed on a principle of flexibility. Funds can use the PMDR approach to define a target but it is entirely optional.

The PMDR is designed on a principle of flexibility, so external disclosures of data are optional. LPs who are familiar with the approach may request the data but sharing metrics is not a requirement for implementing it.

The PMDR is voluntary and optional. It is designed on a principle of flexibility, so can be used for funds of the GP’s choosing. However, the recommendation is to use it across all funds and PortCos to ensure clear and consistent conversations with LPs and other stakeholders.

No, adoption of PMDR is optional for GPs regardless of which industry body they belong to.

Ultimately the number of included funds and PortCos is up to the discretion of the firm. However, we recommend starting by piloting a diverse range of companies at different stages of their decarbonization journey, and expanding to the full portfolio.

GPs usually begin discussing the PMDR with their respective PortCos during the pre-acquisition phase. This allows for an initial understanding on alignment between GP and PortCo decarbonisation efforts and objectives.

The objective of the PMDR is to complement existing net zero alignment and target-setting frameworks whilst providing more detailed guidance for GPs at the earlier stage of their decarbonization journey.
In November 2023, a co-publication between PAII and iCI, which discusses in more detail how PMDR and NZIF align, was published. Please note, however, that this publication does not reflect the 2.0 versions of these guidances.

The PMDR’s definitions of "Aligning" and "Aligned" are based on, and dovetail, with those used by GFANZ’s financing strategies, the NZIF private equity component, and SBTi. PortCos classified using these frameworks should be the same under the PMDR, however we still recommend checking alignment to make sure.

The PMDR was developed in detailed consultation and collaboration with both EDCI and CDP. During this consultation process, the language of the questions used by EDCI and CDP were discussed and updated in order to create a bridge between the frameworks. Therefore, GPs using the PMDR should be able to complete other industry questionnaires with ease.

We have recommendations on the PCAF scores of different emissions data.
See Section 3 of the guidance for details on the PCAF scores for each stage of the Alignment Scale.

Persefoni data quality scores are aligned to PCAF data quality scores. Financed emissions (Total Emissions * Attribution Factor) are the same as Persefoni’s attributed emissions and in line with PCAF.
See Section 3 of the guidance for details on the PCAF scores (and therefore Persefoni data quality scores) for each stage of the Alignment Scale.

Both financed emissions and invested capital data should be used where possible. Financed emissions are crucial because they reflect the actual environmental impact of a PortCo’s activities. Invested capital, on the other hand, helps prioritize where to focus efforts, as larger investments represent greater financial exposure and opportunities to drive meaningful decarbonization.

Yes, exited/ divested companies still contribute to the fund’s overall alignment level. A GP should include divested assets in the year of exit.

An (Emerging) Decarbonization Enabler is a PortCo that directly supports the transition to a low-carbon economy. This group is a sub-set of the category ‘Climate Solutions’ introduced by GFANZ, specifically relating to decarbonization. A Decarbonization Enabler is a PortCo with >50% of revenue related to an activity enabling net zero transition. An Emerging Decarbonization Enabler is a PortCo with >10% of revenue related to an economic activity that is enabling net zero transition and <50% of revenue from high-emitting assets.

Full details on the steps to classify PortCos can be found in Section 2 of the guidance.

If >50% of a PortCo’s revenue is generated using high-emitting assets / activities / services that make it unfeasible to decarbonize through redevelopment, retro-fitting or replacing, a PortCo is considered to have No Current Pathway to Align to the net zero transition. A PortCo considered as having "No Current Pathway to Align" cannot progress past the “Preparing to Decarbonize.”

Further details can be found in Section 2 of the guidance.

The PMDR has been created through 250+ consultations with Private Markets actors globally. While some criteria today may appear ambitious in some markets, they will likely be required by regulators and standard setters in the near future. Given the PMDR has no public disclosure requirements or time limits for how long an asset can stay at a given stage, it strikes the right balance between pragmatism and encouraging GPs towards actions they will ultimately need to take to drive real-world emissions reductions in their portfolio.

In regards to Scope 3, investors can communicate progression of assets on the Alignment Scale without material Scope 3 data up until "Preparing to Decarbonize," as long as they clearly state that what they show only refers to Scope 1 and 2. In addition, it is encouraged to transparently communicate reasons for non-inclusion, planned future actions, etc. when applicable.

To reach the "Preparing to Decarbonize" stage of the Alignment Scale, GPs must have a Decarbonization Plan in place which aims to reduce emissions (intensity) with a non net zero aligned target.

To progress to the "Aligning" stage, this plan must evolve to become a transition plan, which includes a short-term plan to reduce emissions (intensity) aligned to a net zero pathway.
To reach the "Aligned" stage, this plan must further evolve to become a transition plan with a net zero target, which includes reducing emissions (intensity) to a net zero aligned level by 2050.
See Section 3 of the guidance for full details on the plan criteria for each of these stages of the Alignment Scale.

As with all stages of the Alignment Scale, progressing to the next stage requires continuing to meet the requirement of the previous stage, as well as those of the next stage.

To progress from "Aligning" to "Aligned," a PortCo must continue to commit to a near-term, science-based target in line with a transition pathway as well as demonstrate a year-on-year emissions profile in line with a net zero pathway. The requirements for these stages of the Alignment Scale have been designed to be consistent with other net zero frameworks. See Section 3 for additional recommendations and guidance for PortCos planning to progress to the "Aligned" stage.

The "Preparing to Decarbonize" stage has been included to encourage companies that will not reach "Aligning" for a while (sometimes due to the sector they’re in) and allow them to demonstrate they have a plan in place and have progressed from "Capturing Data." For PortCos in low emitting sectors or who are quicker to progress their decarbonization journey, they can skip past this stage and go straight to "Aligning" after "Capturing Data" by committing to a near-term science-based target aligned to a long-term net zero pathway. See Section 2 of the guidance for full details on the criteria to reach each stage of the Alignment Scale.

PortCos with SBTi approved or validated targets sit at least in the "Aligning" stage on the PMDR Alignment Scale. The difference between a “SBT approved” target and a “validated” target is the requirement to make the commitment public within 6 months of approval. SBT validated targets also require yearly reporting, in-line with the PMDR "Aligned" stage requirement for "YoY emissions profile in line with net zero pathway."

There is a full list of taxonomies by geography and available on this Microsite on the "Additional PMDR Resources" tab.

It is advisable to start with one of the leading frameworks and make exceptions/ adaptions as necessary. Transparency around these exceptions/ adaptions is key in meeting the "Aligning" stage criteria.

Financed emissions is the product of the PortCo’s total emissions (Scope 1, 2 and material Scope 3) and the % of emissions attributable to the PortCo. Attributable emissions % can be calculated by dividing outstanding amount by EVIC or (total equity + debt). See Section 3.4. of the guidance for the full details and formula for calculating financed emissions.

Calculating cumulative fund alignment levels for evergreen funds (i.e., funds without a fixed lifespan), can be challenging. Therefore, the cumulative fund overview calculation, as defined in Section 3.4. of the guidance, will only be able to indicate alignment at the point of calculation rather than a period of time.

Material Scope 3 emissions are a criterion at the "Capturing Data" stage of the Alignment Scale. PortCos should be measuring Scope 1, 2 emissions from operations, alongside material Scope 3 emissions, and making the data available to the fund.

Scope 3 refers to Categories 1 to 15, however, completeness improvements are expected as data becomes available. In line with existing guidance, we recommend including material Scope 3 emissions if they represent 40% or more of the PortCo's total emissions (for further guidance, please refer to SBTi and the GHG Protocol Corporate Standard).

We acknowledge that material Scope 3 data availability and quality varies greatly, therefore PMDR points towards a PCAF Score 5 (for "Capturing Data" stage) and PCAF Score 4 (in "Aligning" and "Aligned" stages), which means that proxies and estimates are acceptable to be used. Nevertheless, investors can communicate progression of assets on the Alignment Scale without material Scope 3 data up until "Preparing to Decarbonize," as long as they clearly state that what they show only refers to Scope 1 and 2. In addition, it is encouraged to transparently communicate reasons for non-inclusion, planned future actions, etc. when applicable.

Scope 4 is still a debated topic amongst climate experts and no clear definition has emerged. Section 6 (Appendix) of the guidance provides conceptual commentary on Avoided Emissions.

The new PMDR Support Tool enables portfolio classification and disclosure of key insights internally and/ or externally through automated visualisations directly in Excel or through PowerPoint templates. The tool also provides flexibility on Scope 3 data, allowing GPs the option to communicate initial progress based on Scope 1 & 2 emissions only.

The PMDR Support Tool and the associated Data Visualisation Templates can be found on this Microsite on the “Guidance and Tool” tab.

A GP starts by collating the most recent data from all PortCos/ investees. By inputting the data into the "Input" tab, and answering a series of Yes/ No questions, the tool automatically provides Alignment Scale status along the three questions.

The PMDR Support Tool and the associated Data Visualisation Templates can be found on this Microsite on the “Guidance and Tool” tab.

The tool includes a variety of output formats. All output is auto populated with adjustable views based on user preferences. Output items include:

I) "Summary_Fund-level" and "Summary_Asset-level" tabs: Table summary views on fund or asset-level

II) "Visualisation" tabs: Six different visualisation views based on fund or asset-level, as well as specific metrics (number of PortCos, financed emissions and invested capital)

II) "Data Microsite" tab: Ready-to-use output to populate PowerPoint visualisation templates

The PMDR Support Tool and the associated Data Visualisation Templates can be found on this Microsite on the “Guidance and Tool” tab.

Get in touch with our team through PMDR.Global@bain.com