March 29, 2010
Guide on Climate Change for Private Equity Investors Is Published
by Robert Kropp
The Institutional Investors Group on Climate Change advises pension fund trustees to hold their
private equity fund managers accountable for engaging with portfolio companies on climate change.
The Institutional Investors Group on Climate Change
(IIGCC), a forum for collaboration on climate change for European investors, has published a
guide for pension fund trustees and private equity fund managers, which is designed to increase
awareness of the risks and opportunities associated with climate change. The more than 50 current
members of the IIGCC represent almost $5.5 trillion in assets.
As the guide states, it is clear by
now that investment will be impacted by the regulatory and legislative actions that will occur to
address climate change. "Policies to mitigate climate change and new technologies to address these
new challenges will provide business and investment opportunities for private equity funds,"
according to the guide.
"Furthermore," the guide continues, "If climate change is likely
to be a drag on economic growth, unless addressed, it will negatively affect the value of
portfolios that invest in a cross section of assets, companies, sectors and markets."
guide provides questions for pension fund trustees to ask their fund managers, as well as questions
for fund managers to ask of portfolio companies. The four key aspects outlined in the questions
address awareness, measurement, adaptation and mitigation, and opportunities.
fund trustees, the guide recommends that the following questions be asked of their fund managers.
Do they assess the potential impact of climate change on investments, and are they aware of
emerging regulatory and policy developments? Do they monitor the management of climate change
issues by portfolio companies, and report the information to the trustees? Are they taking action
to hold corporate management accountable for compliance, and actively engaging with organizations
that seek to raise investor awareness of climate change impacts?
The guide also asks
investment advisors if they evaluate fund managers according to the managers' policies and
investment criteria relating to climate change.
For fund managers, the guide recommends
that they ensure that corporate directors are aware of laws and regulations relating to climate
change, as well as the impact of climate change on their business. Fund managers should also ensure
that companies are measuring their climate impact, and have developed policies that address risks
Fund managers should be aware of benchmarking of the performance of
competitors by portfolio companies, whether directors have evaluated the impact of rising carbon
and regulatory costs, and whether companies engage with their supply chains in climate change
The guide concludes by stressing the importance of the proper exercise of
judgment by corporate directors, as well as the development of a long-term plan for addressing
climate change risks and opportunities.
SRI World Group, Inc. All Rights Reserved.