COP28: Private Capital's Pivotal Impact on Climate Change

The United Nations Climate Change Conference (COP28) begins today, and 2023 has already gone down as the hottest year on record – taking us dangerously close to the threshold of 1.5C above pre-industrial levels that the world’s nations have agreed to stick to.

It’s no exaggeration to state that we are all now on the frontlines of the climate crisis.

As such, the private equity and venture capital industry has continued to accelerate its investments in companies and technologies that can help deliver a low-carbon energy system, making the industry a critical component in tackling our current climate crisis.

Tackling climate change and standing strong on responsible investment themes, such as diversity and zero tolerance to corruption, are among the greatest responsibilities facing the European private equity and venture capital industry. Invest Europe helps members address climate change, as well as key social and governance issues, and transparently show their progress.

Invest Europe has made its ESG Reporting Guidelines available to the entire PE & VC community. This gives all firms best practice guidelines for reporting ESG aspects and metrics, policies, and practices. Indeed, with a dozen public endorsements so far of these guidelines, we call on all of our members to adopt the guidelines and set the standard for the wider industry.

We are firm believers in the saying that you cannot manage – and improve – what you don’t measure. With this in mind, Invest Europe established the ESG Key Performance Indicators (KPIs) study to track fund managers’ contribution to issues such as environmental impact, female participation, and combatting corruption. The aim is to measure the industry’s effort on issues that matter to society and policymakers, and to monitor progress on an annual basis.

€2.5tn needed in (predominantly) private sustainable investments in Europe over the next decade

• Transitioning to a low-carbon energy system will necessitate trillions in climate finance annually for sectors like renewable energy, electric vehicles, green buildings, and climate-smart agriculture to curb global warming

• The European Commission plans to mobilise €1 trillion in sustainable investments in the next decade, leaving €2.5 trillion to be funded, mainly by the private sector

• In 2022, private equity and venture capital (PE/VC) had a capacity of €348 billion for new investments, offering a significant opportunity to swiftly support companies and technologies driving the green energy transition

$7bn of PE/VC investment in European renewable energy companies in 2019-2022

• PE/VC have invested $7bn in European renewable energy companies in 2019-2022

• Private equity and venture capital’s model of active stewardship of businesses and long-term investment means it is well placed to identify opportunities to drive the transition to a low-carbon energy system, particularly through investments that enable both cost savings and emissions reductions

Industry-wide focus on ESG

• In 2021, 77% of surveyed European PE/VC firms had ESG investment and portfolio management processes, including 90% of buyout firms

• The Invest Europe Climate Change Guide is a reference for the industry. The Invest Europe ESG Reporting Guidelines set a new standard in ensuring that investors can understand PE/VC firm’s approach to sustainability and, for each relevant fund, the main impacts of its investments on relevant sustainability factors.

Success stories

• A Different Angle: Funding people, with purpose
  
  'A Different Angle' is a groundbreaking online film series presented by Invest Europe and produced by BBC StoryWorks Commercial Productions. It explores the vital role of private equity and venture capital in European society, shedding light on the impact of these investments on businesses, innovation, and societal change. Discover the human stories behind these transformative forces and their positive contributions to our daily lives.

  • Leading the charge in ultra-fast batteries
    Learn more about the innovative and ultra-fast battery charging technology being developed and deployed by a Cambridge spin-out called Nyobolt.

  • Creating the future creatives
    In this film about Cinven-backed fashion brand Kurt Geiger, we examine the social element of ESG and how it pays off for people, product and profits. How responsible investment can transform businesses

  • Storytelling that matters
    Digital publishing company Mi Cuento specialises in making children the hero of their very own tale. Enter their story here... 

Other examples from our Members:

• Aphea Bio (member only)
  Aphea.Bio aims to become a global leader in the development of microorganism-based biocontrols and biostimulants, thereby ensuring a safe and healthy food chain and providing reliable science-based solutions to build the agriculture of the future.

• EQT (member only)
  EQT’s science-based targets have been the firm’s flagship climate initiative during the last 24 months and are holistically addressing climate efforts across the firm.

• Guala Closures Group (member only)
  Established in 1954, Guala Closures Group (“Guala Closures” or the “Company”) is a world leader in the production of closures for spirits, wines, water, beverages and cooking/olive oil.

• Havea
  A leading European natural healthcare player with a unique consumer/patient-centric approach.

• MDT Technologies (member only)
  MDT is one of the leading manufacturers of smart building components, enabling the automation and control of multiple functions including heating, ventilation, lighting in residential and commercial buildings based on the KNX standard.

• Norled
  Norled is a Norwegian shipping company responsible for the group's ferry transport. Tide operates automobile ferries and fast ferries in Rogaland, Vestland, Sunnmøre and Trondheim Fjord on contract with the Norwegian Public Roads Administration, Kolumbus and Skyss.

Our Members at COP28 Leadership Interview Series:

• Invest Europe Member GENUI, a mid-market buy-out firm, participated in the COP28 Leadership Interview Series, discussing its 'Good Entrepreneurship' approach. The interviews feature approximately 50 global corporations, medium-sized companies, and investment firms at the forefront of driving innovation and positive change by integrating sustainability into the core of their operations.

See also our related ‘Invest Europe Summer Series: Advancing sustainability’ landing page.

FINANCIAL TIMES

Countries reach 'historic' COP28 deal to transition away from fossil fuels

Revised UN agreement strengthened but 'seriously lacking' when it comes to financing the transition away from fossil fuels, says scientific advocacy group.

REUTERS

New COP28 draft deal stops short of fossil fuel 'phase out'

The Agreement lists eight options that countries could use to cut emissions, including: "reducing both consumption and production of fossil fuels, in a just, orderly and equitable manner so as to achieve net zero by, before, or around 2050".

THE GUARDIAN

Cop28 draft climate deal criticised as ‘grossly insufficient’ and ‘incoherent’

The text put forward after 10 days of wrangling was received with concern by many, though others welcomed elements of the draft including the first mention in a Cop text of reducing fossil fuel production.

LES ECHOS

COP28: banks will have to speed up to meet their targets

As COP28 draws to a close in Dubai, banks are now facing up to the reality of what their commitments entail.