Focus topic: Climate resilience across the funds
In order to help identify, monitor and build resilience to climate change within the funds’ portfolio companies, we plan to refine our ESG integration approach and annual request for information each year to reflect current trends and regulatory developments.2 Companies in the private equity funds are, overall, reporting greenhouse gas (GHG) emissions with greater rigour than in 2020, with seven more companies procuring or generating renewable energy and three setting science-based targets (SBTs).3
Climate change (number of companies reporting)4
The data indicate a positive trajectory on climate action across the buyout funds. However, given the urgency and material significance of climate change to economic stability, we as a firm have set a goal to drive wider and faster action. In the year ahead, we intend to expand portfolio engagement, building on a series of sector-focused carbon footprinting and target setting webinar sessions for portfolio companies developed and delivered alongside external consultants in 2021. Internally, we are assessing the practical implications of setting SBTs for the firm and the funds, where relevant (drawing on the Science-Based Targets initiative Private Equity Sector Guidance).
Leading by example at Permira
We have been monitoring and reducing our own GHG emissions5 since 2018. In 2021, our total carbon footprint was 1,806 tonnes CO2e, a c.65% reduction on 2018 in absolute terms. These reductions are, in part, due to reduced business/commuting travel and office occupancy in 2021, as a result of Covid-19 (though they do include home-working emissions). However, with e-conferencing proven as an effective solution through the pandemic, combined with our new flexible working policies, we hope to maintain this downward trajectory.
Environmental priorities at Permira
Reducing our environmental impact is overseen by an environmental advisory group of Permira representatives from international offices. Meeting quarterly, in 2021 the group achieved further milestones including:
- renewable energy: our London and Stockholm offices are paving the way with 100% renewable energy-sourcing.
- single-use plastics: our London office is now plastic-free on single-use items, thanks to initiatives across its canteen and workspaces.
- green buildings: in addition to BREEAM Excellent in eco-construction at our London office, the site attained ‘Very Good’ for eco-performance in-use during 2021.6
1. In 2021, we sought to further integrate climate physical and transitional risk exposure within our ESG framework, considering the Taskforce on Climate-related Financial Disclosures (TCFD) guidelines. We have undertaken climate risk screening and are now doing scenario analyses where there is higher risk with a view to publishing a TCFD statement.
2. With a focus on private equity buyout funds where we have the greatest influence. The focus is on buyout funds, where we have the greatest influence. Within the buyout funds, more focus is placed on companies with higher ESG risk or opportunity. Engagement in the PGO portfolio is more limited and may focus on ESG risks identified during due diligence or emerging post-investment, as relevant. For direct lending, there are fewer opportunities for direct engagement and has previously been focused on companies where the funds have equity or there is no sponsor.
3. Science-based targets provide companies with a clearly-defined path to reduce emissions in line with the Paris Agreement goals of keeping global temperature increases well-below 2°C (and preferably 1.5°C) above pre-industrial levels.
4. The data presented in the bar charts includes 46 buyout fund portfolio companies for 2021 and 41 portfolio companies for 2020. For 2021, 4 companies were excluded where a) exits were signed/pending by the end of 2021, b) no reporting submission was received because the investment was completed in December 2021 (1 company). On the bar charts, there is a category for 'Not reported'. This indicates where there was no response or data for that particular question.
5. Our carbon footprint assessment is conducted with the support of external consultants and includes Scope 1 emissions (gas and air conditioning); Scope 2 (electricity, including by colleagues working from home); and Scope 3 (flights, trains, taxis, water, waste, outbound deliveries and staff commuting).
6. The Building Research Establishment Environmental Assessment Method (BREEAM) is the world’s leading sustainability assessment method for master-planning projects, infrastructure and buildings.