By James Mandel and Jake Shirmer
Submitted by Blackstone
James Mandel, Blackstone’s Chief Sustainability Officer, and Jake Shirmer, a Principal in Portfolio Operations, explain why tracking greenhouse gas emissions is neither greenwashing nor a compliance checkbox.
The next ten years will be a critical decade to reduce greenhouse gas (GHG) emissions. Investors increasingly recognize the urgency of climate change and have allocated a growing amount of capital to sustainability efforts, with $500 billion dedicated to decarbonization in 2020 – double the amount invested in 2010. But while most CEOs believe climate is a critical topic for them to address, more than half admit their companies are not currently capable of measuring GHG emissions.
It’s a missed opportunity to drive value. At Blackstone, we’ve structured our carbon accounting program as an integral part of active decarbonization. We are targeting emissions reductions in our new companies where we control energy usage of at least 15% in aggregate over the first three years. At the core of this approach is a focus on high-quality, measured data that can inform decision-making. We partner with our portfolio companies to help them build out the capabilities they need to monitor, quantify and reduce their emissions. We do this for several key reasons.
First, tracking GHG emissions enables companies to engage in the kind of meaningful, transparent dialogue that stakeholders demand. A 2019 Environmental Defense Fund assessment indicated that across all surveyed sectors, over 80% of stakeholders are seeking additional actions related to climate impacts. Private markets in particular have room to grow in making available robust and consistent climate disclosures, as highlighted and supported by recent efforts such as iCi’s GHG accounting and reporting guidance for private equity. Measuring emissions equips companies with the information they need to approach these conversations with confidence, able to articulate what they’ve done, what they plan to do and how they plan to get there.
Second, GHG accounting can help companies manage strategic risks. Governments representing about half of the collective global economy have implemented policies that price carbon, which aim to reduce GHG emissions. Similarly, regulations that require companies to report GHG emissions are being enacted in various jurisdictions around the world. Measuring and managing emissions can help companies get ahead of the risk these factors pose, mitigating future financial burdens or operational constraints.
Third, GHG inventories are a window into a company’s operations that can help leaders spot other opportunities for value creation and cost savings. For instance, companies that identify significant emissions from office spaces can select more energy-efficient buildings for new spaces. High-performing energy-efficient commercial office buildings can use as much as 40% less energy than the average commercial office building, reducing utility costs.
For these reasons, we focus on emissions measurement as an operational capability rather than as a compliance request. We start with the company’s goals and operational strategy, and then we look to help them build infrastructure internally or externally to track emissions. Because of our scale, we can invest in developing approaches that can be leveraged by many companies – partnerships with software and consulting providers (including a few in our own network like Sphera and RE Tech Advisors), detailed accounting guidance and capability-building for those who want to do inventories in-house, and experts on hand to help companies collect, analyze and interpret emissions data.
For companies in the scope of our emissions reduction program, this GHG accounting process feeds directly into decision-making for emissions reduction. For all our companies, it can help set the right goals, understand the opportunities and costs associated with decarbonization, and create stronger partnerships with customers, employees and other stakeholders.
We undertook this initiative because we believe it will unleash significant value for our companies and our investors. We view decarbonization the same way we view other operational interventions like data analytics, healthcare, talent development, brand strategy and technology and product – that is, an opportunity to accelerate value by making our companies stronger.
Rightly understood, then, tracking GHG emissions is neither greenwashing nor a compliance checkbox. It’s a critical tool that investors can use to build more valuable businesses. We urge leaders to take full advantage of this tool, applying it alongside other operational interventions to accelerate their company’s growth and prepare it for the changes of the coming decade.
Learn more about Blackstone’s approach to sustainability.
About the Authors
James Mandel is Chief Sustainability Officer at Blackstone. Jake Shirmer is a Principal in Blackstone’s Portfolio Operations group.
Blackstone is one of the world’s leading investment firms. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, and the communities in which we work. We do this by using extraordinary people and flexible capital to help companies solve problems. Our $731 billion in assets under management include investment vehicles focused on private equity, real estate, public debt and equity, life sciences, growth equity, opportunistic, non-investment grade credit, real assets and secondary funds, all on a global basis. Further information is available at www.blackstone.com. Follow Blackstone on Twitter @Blackstone.
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