Expansion aims to support private markets efforts to reduce GHG emissions and speed-up net zero transition.
Initiative Climat International (iCI) has announced the launch of an Asia-Pacific (APAC) chapter, expanding its reach from existing operations in North America and Europe. iCI aims to drive collaborations between private market investors in reducing greenhouse gases (GHG) and accelerating the transition to a “zero-carbon, climate resilient” economy.
The iCI is a global private equity climate initiative which aims to “improve the industry’s understanding and management” of climate change and its associated opportunities and risks. It currently has 206 members globally which collectively have US$3 trillion in assets under management.
Members are expected to commit to sharing knowledge, experience and best practice, as well as developing resources aimed at standardising practices on climate risk mapping, disclosure and target-setting. They are also expected to actively engage with portfolio companies to reduce their GHG emissions and contribute to an overall improvement in sustainability performance.
Jie Gong, Chair of iCI’s APAC chapter, said: “Climate change is a global challenge requiring a truly international response and this launch is an important step to harness and build on the collective efforts of private market firms and professionals across Asia Pacific”. Gong is a partner and ESG committee co-head at private markets firm Pantheon. She founded and chairs the ESG Committee of the Hong Kong Venture Capital and Private Equity Association and was previously a global committee member of the private equity advisory committee of the Principles for Responsible Investment (PRI).
The iCI’s expansion looks to underline the seriousness of the sector’s commitment to tackling climate change. Private equity has historically been slower than traditional asset managers in incorporating ESG factors into their investment processes and providing related data and reporting.
In 2020, only a quarter of private equity firms had a team dedicated to ESG integration. But a Preqin report from earlier this year suggested private equity markets were making “clear progress” towards ESG integration. The report also said demand for ESG policies is significant, with over 70% of liquidity partners surveyed citing investor demand the most common reason for establishing ESG policies.
While private equity investment processes and strategies tend to be more opaque and time-bound than long-only firms, their greater degree of management control over early-stage portfolio companies can be supportive of climate-positive innovation.
A number of initiatives have improved the private equity sector’s sustainability disclosures, including the ESG Data Convergence Project, co-launched by Carlyle Group last year. However, some private equity firms have been reported as failing to support the climate reporting requirements of pension fund clients.
Peter Dunbar, PRI’s Head of Private Equity, said: “The degree of interest for a network in APAC, where in some markets there has historically been less focus on climate action, that supports collective ambition on climate across the private equity sector is very encouraging.”
Firms supporting iCI’s APAC expansion include BAI Capital, CVC, Warburg Pincus, EmergeVest, KKR, IDG, Pacific Capital and Flexstone.
The iCI is a partner of The Investor Agenda and is officially endorsed by the PRI, which provides strategic and secretariat support. It was originally launched in 2015 by a group of France-based private equity firms with the goal of contributing to “achieving the objectives” of the Paris agreement.
Read more articles like this on Regulation Asia’s sister publication, ESG Investor.