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IIGCC introduces net zero framework for private debt industry

The Institutional Investors Group on Climate Change has introduced guidance aimed at helping the private debt industry set and achieve net zero commitments. 

The IIGCC’s new framework, which is part of the broader Net Zero Investment Framework encompassing seven asset classes, was developed by IIGCC alongside Ceres, in addition to input from members of IIGCC’s private markets working group, according to a press statement. 

The IIGCC said that its guidance recognised that “given the unique characteristics of private debt investments, distinct actions are required to set and deliver decarbonisation goals for this asset class”. 

The IIGCC wrote on its website that the Net Zero Investment Framework for the Private Debt Industry could “be adopted by any private debt investor active across private debt, be that in direct corporate lending, venture debt, and other segments of the market including private structured credit”. 

Key aspects of the guidance include a 12-month grace period post-deal close, a three-way engagement model involving private equity sponsors, climate-related ESG margin ratchets and the inclusion of requests for climate disclosures in loan documentation. 

Misa Andriamihaja, Private Equity Lead at IIGCC, said that the guidance had the potential to “raise ambition levels for both GPs and LPs active in private credit, as well as underlying portfolio companies”. 

Peter Ellsworth, Senior Director at Ceres, added that its “emphasis on communication with all parties in this asset class, including private equity sponsors, will help accelerate climate action by private companies”. 

 

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