Climate Change Data

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity, Equity, and Inclusion (DEI)
• Sustainable Investments
• Principle Adverse Impacts (PAI)
• Good Governance

Environmental Achievements

• Increased proportion of managers assessing and measuring climate change-related risks and opportunities to 55% (from 32% two years prior).
• Increased proportion of managers monitoring greenhouse gas (GHG) emissions to 48% (from 28% two years prior).
• Private debt portfolio's GHG emissions intensity significantly lower than its net-zero budget.
• GHO Capital's Sterling Pharma reduced climate risk and delivered GBP 2 million in energy savings in 2022, with GBP 4 million expected in 2023 and additional revenues of GBP 6.5 million from waste conversion.

Social Achievements

• Increased proportion of managers with a DEI policy in place to 69% (from 50% two years prior).
• Increased proportion of managers considering DEI when selecting investments to 56% (from 51% last year).

Governance Achievements

• Alignment of all new private equity investment offerings with Article 8 requirements under SFDR.
• Alignment of one LGT CP private equity offering with Article 9 requirements under SFDR.
• Improved ESG ratings for 17 managers over the last 12 months due to enhanced ESG practices.

Climate Goals & Targets

Environmental Challenges

• Limited availability and quality of ESG data in the private equity industry.
• Lack of common reporting standards for private companies.
• Lack of reliable, relevant company-level data for EU Taxonomy alignment.
• Limited coverage of economic activities in the EU Taxonomy.
• Lack of a clear SFDR framework for hedge funds.

Mitigation Strategies

• Participation in the ESG Data Convergence Initiative (EDCI) to streamline ESG data collection and reporting.
• Leveraging alternative data sources, including a proprietary ESG Cockpit, for proxy analyses of PAI indicators.
• Developing a proprietary ESG rating system for private equity managers.
• Using Upright's data-driven quantification model to measure the positive and negative impact of investee companies.
• Focusing on LGT CP's own ESG process and customization capabilities for hedge funds.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events

Transition Risks

• Regulatory changes

Reporting Standards

Frameworks Used: SFDR, EU Taxonomy, TCFD, UN Global Compact, OECD Guidelines for Multinational Enterprises, UN Guiding Principles on Business and Human Rights, SASB

UN Sustainable Development Goals

• SDG 11 (Sustainable Cities and Communities)
• SDG 13 (Climate Action)

Investments in ILS support SDGs 11 and 13; impact strategies invest in climate action, healthcare, and inclusive growth.

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity, Equity, and Inclusion (DEI)
• Biodiversity
• Human Rights
• Responsible Supply Chains

Environmental Achievements

• Increased proportion of private equity managers monitoring greenhouse gas emissions for their portfolio companies.
• Implementation of externally validated biodiversity metrics in private debt strategies.
• FSN Capital reduced energy consumption by 30% in one portfolio company.
• A UK-based private equity manager implemented an SBTi-aligned climate strategy targeting a 42% reduction in Scope 1 and 2 emissions by 2030 and ensuring 100% of eligible portfolio companies will have science-based targets by 2030.
• Increased proportion of private debt portfolio companies disclosing carbon emissions (82% in 2023 vs. 9% in 2015).
• 100% renewable electricity at Swiss HQ since 2022.
• Offsetting 100% of GHG emissions from global operations since 2010.

Social Achievements

• Increased focus on DEI practices among private equity managers, with a rise in the percentage of GPs with formal DEI policies and considering DEI in investment decisions.
• East Asia-based private equity manager increased the proportion of female new hires from ~20% in 2020 to ~40% in 2022.
• Improved ESG framework with the introduction of biodiversity and income equality metrics into the Sovereign Sustainability Assessment and incorporation of the Net Zero Alignment Indicator into the climate transition strategies by a long-only manager.
• Launched a range of CSR initiatives focusing on people, community, suppliers, and direct environmental impacts.

Governance Achievements

• Improved ESG ratings of managers (73% of private equity managers have ESG ratings of 1 or 2 in 2024).
• Implementation of a proprietary ESG Cockpit and manager assessment scoring systems to track and report the real-world impacts of ESG efforts.
• Initiation of a project to incorporate granular portfolio-level data derived from participation in the ESG Data Convergence Initiative (EDCI), tracking 1,800 companies with 26,000 data points.
• Increased monitoring of Principal Adverse Impacts (PAIs) among private equity managers.

Climate Goals & Targets

Environmental Challenges

• Data limitations in assessing decarbonization strategies and capital allocation for net-zero alignment.
• Relative shortage of hedge fund managers with high ESG engagement.
• Limited availability of GSS bonds, leading to potential portfolio concentration risks.
• Difficulty in obtaining comprehensive Scope 3 emissions data.

Mitigation Strategies

• Utilizing alternative data sources and proprietary tools like the ESG Cockpit.
• Engaging with managers to improve ESG efforts.
• Complementing GSS bond allocation with investments in sustainability champions.
• Using proxy analyses for PAI indicators based on averages of public market companies.

Supply Chain Management

Responsible Procurement

• Supplier Code of Conduct

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events (hurricanes, wildfires, floods)

Transition Risks

• Regulatory changes, market shifts towards renewable energy

Opportunities

• Investments in renewable energy, green technologies

Reporting Standards

Frameworks Used: PRI, SFDR, EU Taxonomy Regulation, SBTi, TCFD, EDCI, GRI, SASB

Certifications: Equal pay leader by Swiss Fair-ON-Pay organization

UN Sustainable Development Goals

• SDG 7 (Affordable and Clean Energy)
• SDG 13 (Climate Action)
• SDG 14 (Life Below Water)

Investments in renewable energy, sustainable fisheries, and water projects.