The US Securities and Exchange Commission has dropped its proposed rules for climate risk disclosure. But institutional LPs, including pension funds, university endowments and sovereign wealth funds, overwhelmingly expect their private equity managers to assess and manage climate risks in their portfolios, according to a scan of limited partners by London-based Unwritten, which has developed a climate data platform used by fund managers and corporations.
The company collected statements and surveyed 100 of the worldâs largest LPs, which collectively allocate $2.6 trillion to private markets. In most regions, more than 80% of LPs expect quantitative and qualitative climate risk assessments.
Singapore-based Temasek, one of the worldâs largest allocators to private markets, for example, forecasts âclimate change will lead to significant economic lossesâ for the global economy.
The US is an exception: Unwritten found that barely half of US-based LPs expect climate risk assessments.
Overall, LPs are less likely to insist on net-zero or other specific emission reductions.
Systemic exposure
Climate risk has become an increasingly routine aspect of good fund management, according to Unwrittenâs white paper. That includes identifying climate-related risks during due diligence, pricing those risks and managing them in business operations and physical assets.
âSuch attention can even make climate risk into a strategic advantage, setting a business apart from competitors that share the same systemic exposure but are less resilient to it,â the authors write.
GPs can set themselves apart as well; Australian Retirement Trust, for example, âexplicitly assesses an investment managerâs maturity on two thematic topics: climate change and modern slavery.â
Unwritten has an obvious interest in highlighting LP expectations: âLP mandates on climate risk management are a central reason behind a GPâs decision to procure a climate risk tool,â the company says.
