A ‘call to action’ that will not be ignored

A coalition of investors with $11trn in assets has told private markets managers exactly what it needs, and when, in terms of climate action and disclosure.

The Net Zero Asset Owners Alliance released a “call to action” to private markets managers last week; it’s a document that should cut through the climate noise.

The alliance comprises 82 investors with combined assets of $11 trillion who have all committed to reach net-zero emissions across their portfolios by 2050. The document it has published could prove a decisive piece in the puzzle in the urgent endeavour of curbing the climate crisis.

Put simply: these institutional investors are telling private markets asset managers exactly what they need when it comes to both reporting and “direction of travel” on climate action. The document gives expectations on timelines for emissions reporting (starting next year) and for making public net-zero commitments. It gives disclosure expectations (based around the Taskforce on Climate-related Financial Disclosures framework) and details how private markets firms should be approaching fossil fuel-related investments. It also gives asset class-specific expectations (turn to p. 14 of the document for infrastructure).

This matters, because at the moment private markets are an emissions data blind spot in many institutional portfolios. Take Border to Coast, for example. The £38.4 billion ($46.6 billion; €44.7 billion) UK pension pool told affiliate title New Private Markets back in October that, while it now has a roadmap for how it will reach its net-zero 2050 target, this does not cover private markets. This is due to the lack of reliable and comparable emissions data for it to conduct carbon footprinting: essential for setting achievable decarbonisation targets.

This is a common issue. According to research by investment consultant Hymans Robertson in August this year, the lack of emissions data relating to private markets portfolios was jeopardising the ability of asset owners to align their own reporting with the Taskforce on Climate-related Financial Disclosures’ framework (a regulatory obligation for some pension funds).

Looking across institutional portfolios, private markets constitutes “the most difficult gap in the data right now”, Patrick Peura – UN-convened NZAOA Engagement Track co-lead and ESG engagement manager at Allianz – told New Private Markets last week.

The problem to date, said Peura, is that members of the alliance were too often hearing words to the effect of “You are the only one asking for this” when they engaged with managers over emissions data. This document should provide an antidote to that type of pushback. Or in Peura’s more measured words, it will help with those “bilateral microconversations”.

Understanding of climate considerations within private markets is accelerating. As we reflected recently, significant specialist expertise now resides in the LP, GP and advisory community. Progress and thinking on climate is not, however, evenly spread among managers. Hopefully this document helps everyone get on the same page.


Toby Mitchenall is PEI Group’s Senior Editor, ESG and Sustainability, responsible for affiliate title New Private Markets.