Fullerton Fund Management and the United Nations Development Programme (UNDP) have teamed up to develop a sustainability management framework to guide private equity (PE) climate investing in Asia, using the UNDP’s Sustainable Development Goals (SDG) Impact Standards as a foundation.

The framework guides PE investors on how to align their strategy, management, transparency and governance practices, to achieve their decarbonization goals.

PE investors are well-positioned to exert greater influence on portfolio companies over climate and sustainability issues. However, disclosure standards in the region are uneven and corporate disclosures remain lacking, particularly in emerging Asia.

This poses challenges for climate investors who are looking to assess the material environmental issues, and their implications, for their investments. 

Governments have made strong commitments to decarbonize their economies and, according to the Asia Society Policy Institute, around US$53.5 trillion of investment is required between 2020-2060 to meet the net-zero targets already announced.

Therefore, there are significant investment opportunities ahead, and private equity can play a pivotal role – alongside public spending – in bridging the funding gap. The environmental and commercial case for climate investments in Asia is compelling, with the addressable market size for green businesses in Asia targeted to reach over US$4 trillion by 2030.

The newly launched  sustainability management framework guides private equity investors on how to integrate sustainability considerations and the SDGs into their strategy, management, transparency and governance practices to achieve their decarbonization goals.

Through the framework, climate investors can conduct a critical evaluation of the various possible investment practices and decide on the unique set of practices that aligns best with their investment mandates and stakeholders’ requirements.

“As an investor of private capital in Asia, we recognize that sustainability issues have considerable implications for a company’s investment value, particularly for PE, which has a long investment horizon,” says Huck Khim Tan, Fullerton’s deputy chief investment officer and head of alternatives. “With the launch of this framework, we are committed to integrating sustainability considerations in our PE climate investments.

“More importantly, we hope to share this framework and insights from real-world case studies with our peers to enable them to evaluate the relevant sustainability aspects required to optimize decarbonization in the region.”