Helping a Private Equity Firm Track Portfolio Company Emissions

Case Study

Helping a Private Equity Firm Track Portfolio Company Emissions

Delivering custom technology to help a customer inform decisions, meet emerging regulations, and demonstrate climate leadership.

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Challenge

Private equity (PE) firms face unique challenges when it comes to climate action. In addition to balancing ESG with long-term profitability, PE firms have massive Scope 3 emissions footprints. According to CDP, the emissions impact from portfolio companies, known as category 15 of Scope 3 emissions (investments), is over 700 times larger than Scope 1-2 operational emissions. Getting consistent GHG data is a real challenge for PE firms, as portfolio companies often have different GHG accounting practices. Without standardized, high-quality information, it’s nearly impossible to make an apples-to-apples performance comparison.

Despite the barriers, our private equity client recognized the importance of reducing GHG emissions across its 75 portfolio companies. Like many PE firms, it lacked the tools to accurately measure emissions, and the software solutions its leaders explored were too expensive.

The firm needed an effective solution that could establish a baseline without sacrificing accuracy. On top of this, the tool needed to be flexible and user-friendly enough for use in international and US-based facilities and across multiple industries, including IT, services, and retail.

Opportunity

Point B measured GHG emissions across the firm’s operations and portfolio companies and identified areas where emissions could be reduced. In the process, we helped develop a custom tool to streamline GHG tracking and reporting amongst portfolio companies, inform future decision-making, and satisfy increasing investor demands.

Approach

To kick off the project, we first identified relevant Scope 1-3 data points and conducted a firm wide GHG inventory. Based on our findings, we recommended that our client engage its portfolio companies for a more complete GHG footprint. This conversation led to the creation of a bespoke tool to measure portfolio company emissions.

Today, our client is working with portfolio companies to set GHG reduction goals using insights gleaned from the GHG tool. The firm has asked all majority owned companies to conduct a feasibility study to set their own Scope 1-3 reduction targets by EOY 2023.

Project Outcomes

Thanks to the development of the custom GHG tool, the PE firm can consistently and accurately measure portfolio company emissions, a major hurdle for financial institutions. This is helping the firm make smarter decisions, comply with emerging regulations, and stand out as a climate leader amongst its peers.

Key Wins For The Firm And Its Portfolio Companies

Average cost savings of $20,000 USD or 33% compared to other software solutions.
More effective tracking and management of GHG emissions across operations and investments.
Demonstrates commitment to climate action and provides a competitive advantage in attracting investors.
Smarter, faster decision making fueled by accurate assessment of portfolio company GHG performance.
Standardized GHG accounting methodology across all 75 portfolio companies.
Set a baseline for engaging portfolio companies on performance and co-creating goals for future emissions reduction.

Our client already took climate issues seriously, with a solid understanding of its operational footprint and desire to lead in this space. Now it has the tools needed to make a positive impact on the greatest contributor to its GHG emissions – its portfolio companies.