DOES YOUR PRIVATE EQUITY FUND NEED A CARBON ASSESSMENT?

In response to increased regulatory and investor pressure, our client, a value-driven private equity firm, recognized the importance of addressing carbon emissions within their portfolio. They sought a comprehensive portfolio-wide carbon assessment to analyze their environmental impact, meet evolving regulatory requirements and better align with investor expectations.

A&M’S ROLE

A&M played a substantial role in supporting the client by providing a portfolio-wide carbon assessment. Our esteemed environmental, social and governance (ESG) team made up of environmental engineers, greenhouse gas (GHG) experts and strategy consultants worked closely with the client and their portfolio companies to compile, consolidate and analyze energy use data and GHG emissions, confirming regulatory compliance and sustainability initiatives were met.

DATA COLLECTION AND ANALYSIS

Working closely with the client’s portfolio companies, A&M identified the largest sources of carbon emissions and performed GHG calculations using data provided by the client and emissions factors. Through detailed analysis, A&M identified the portfolio companies’ carbon emissions hotspots and immediate approaches to drive reductions. At the private equity fund-level, A&M identified the most carbon emissions-intensive companies within the portfolio, compared them with industry peers and used the results to recommend appropriate actions to drive total value.

INSIGHTS AND RECOMMENDATIONS

Based on our comprehensive analysis, A&M generated a detailed fund-level report and concise company-specific report summaries. Our findings provided valuable insights to the client and individual portfolio companies, empowering them to both strengthen data processes and reduce carbon emissions. Key recommendations for portfolio companies included energy audits, equipment upgrades, fleet optimization, route optimization and renewable energy procurement, ensuring emissions reduction and regulatory compliance.

The analysis also emphasized the need for the private equity fund to focus on its four highest-emitting companies, which have the largest impact on its carbon footprint, if it wants to make meaningful reductions in its carbon emissions reduction efforts.

KEY FINDINGS

• Major Emission Contributors
  • The four largest emitting portfolio companies accounted for 85% of fund-level emissions, highlighting the companies to focus on for targeted carbon emissions reduction efforts.
• Emissions Intensity 
  • The private equity fund demonstrated an emissions intensity of 16.5 metric tons of CO2e per $m of revenue, aligning with industry benchmarks.
• Sector Impact
  • The industrial and multi-unit sectors contributed 47% and 46% of carbon emissions, respectively, emphasizing the need for sector-specific sustainability strategies.
• Emission Intensity Comparison 
  • 63% of assessed companies exhibited higher carbon emissions intensity than their peers, presenting opportunities for efficiency improvements.
• Indirect Emissions 
  • Indirect Scope 2 emissions (electricity usage) constituted 71% of the overall portfolio emissions, indicating the importance of energy efficiency measures and renewable energy sourcing.
• Data Challenges 
  • Some portfolio companies faced data inconsistencies, including missing or unknown fuel and utility usage. Addressing data quality gaps is crucial for accurate emissions tracking and reduction strategies.
• Achieving Sustainability and Compliance 
  • Through A&M’s expertise and comprehensive analysis, the private equity firm gained valuable insights into their portfolio’s carbon footprint, including where to prioritize fund resources when considering how to reduce its emissions.