ESG in Private Equity | Anthesis Group

The growing climate imperative

Addressing climate concerns has become an expectation for private equity (PE) firms and their portfolio companies. With climate change developing into a mainstream issue, PE firms are subject to increasingly stringent investor and regulatory requirements, such as the Sustainable Finance Disclosure Regulations (SFDR), Principles for Responsible Investment (PRI) guidelines, and the Data Convergence Initiative. In addition, managers that view the climate agenda as a strategic imperative, rather than simply compliance, can build strategies that enhance long-term financial returns.

Leading General Partners are raising the bar by committing to science-based targets and working to lower emissions while Limited Partners are making bold Net Zero commitments and are seeking to invest with managers that are proactively managing the issue set.

Portfolio companies are simultaneously experiencing increased expectations from customers and consumers, while capital sources are also favouring portfolio companies with differentiated climate performance.

Strong climate programs must be underpinned by robust greenhouse gas data and seek to exploit decarbonisation opportunities while simultaneously mitigating climate risk. Anthesis can help you and your portfolio companies protect and create value as the climate—and society’s response—shifts rapidly.

SBTi for Private Equity
Anthesis is proud to have supported the Science Based Target Initiative (SBTi) to develop dedicated guidance for the private equity industry. Written in partnership with an expert advisory group of over 30 private equity firms, the guidance helps private equity firms set and reach science-based targets across their operations and investments.

Net Zero for Private Equity
Through the facilitation of an industry focus group of leading practitioners, Anthesis worked with IIGCC, Ceres and other PAII member organisations to write the Private Equity Component of the Net Zero Investment Framework (NZIF). The guidance establishes a robust yet practical framework for both GPs and LPs to pursue net zero, creating a unified approach for the industry.

Greenhouse Gas (GHG) Inventories

General Partners and portfolio companies often find completing a GHG inventory to be difficult. To address these challenges, we have developed a well-defined inventory approach that delivers hands-on guidance from our expert advisors alongside Anthesis RouteZero, our leading digital greenhouse gas solution. We guide clients each step of the way, always looking to build knowledge and capacity while also making the process as streamlined and straight forward as possible.

We can also apply this process to a cohort of portfolio companies, to drive efficiencies of scale.

Our Scope 1, 2, and 3 inventories follow the GHG Protocol and use best-in-class emissions factors to give you a reliable, repeatable result. Our experts help interpret these results to draw out insights, and we can build from here to advise on decarbonisation opportunities, goal setting, and climate risk.

Goal Setting & Decarbonisation

Companies can drive tangible value from setting carbon reduction goals and decarbonising their operations and value chains.

Anthesis is the leading provider of target-setting services. Not only have we supported numerous companies through the process of setting approved SBTs and science-aligned targets, but we also partnered with the Science Based Targets Initiative (SBTi) to write their guidance for Private Equity. Our tools enable us to generate impactful visualisations of target options to support decision-making and socialisation within your firm and portfolio.

But no goal should be set in a vacuum, and our decarbonisation capabilities help to flesh out a path to achievement. We leverage our in-house team of energy engineers to deliver right-sized assessments of reduction opportunities, from light-touch remote assessments to on-the-ground energy audits of complex heavy industry. Alongside efficiency, we also can evaluate renewable energy and carbon offset opportunities. The result is an actionable roadmap—informed by financial analysis—of prioritised decarbonisation opportunities for achieving your reduction ambitions.

Climate Risk

Not only do climate risk and opportunities have the potential to impact investment returns, but climate risk disclosures are now requested or required by many regulations and initiatives important to private equity. We support clients in developing solutions that protect value and meet the requirements of the Sustainable Finance Disclosure Regulations (SFDR), UK’s mandatory climate disclosure, Principles for Responsible Investment (PRI), and Task Force on Climate-related Disclosures (TCFD).

Our process begins with an outside-in climate risk assessment that leverages leading software and datasets to efficiently develop a view of how physical changes to the climate and market transitions will negatively or positively impact each investment. This assessment allows us to prioritise direct engagement across the portfolio, working with management and deal teams to refine our understanding of the risks and develop mitigation strategies. As a final step, we can conduct a quantitative scenario analysis to understand the financial exposure under well-accepted climate scenarios.

We also support clients to complete climate due diligence for target acquisitions, by assessing the climate risk exposure of a target company as well as its potential to decarbonise its operations.