Only 3% of PE funds are Article 9 funds [Private Equity Insights]

Private equity strategies are in no hurry to adopt regulatory labels, but they are showing signs of improvement when it comes to factoring in climate change

Only 3% of private equity funds classify themselves as dark green Article 9 strategies, i.e. those that make predominantly sustainable investments.

Article 9 is a very high hurdle for the private equity space, especially given that sustainable investments are still a very small part of GDP and the total economy.

“The 3% number was not surprising to me, because we’re really talking about impact funds, which are a very small percentage of the private equity universe and often follow a specific theme, for example, green energy funds”, Tycho Sneyers, a managing partner at LGT Capital Partners, said.

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Sneyers said another route for managers to qualify for Article 9 would be to align investments with the EU taxonomy, which is currently not taking all business areas into account and will take some years to develop.

LGT Capital Partners looked at 303 private equity managers globally, and 57% of those said they hadn’t implemented the EU’s Sustainable Finance Disclosure Regulation (SFDR).

Despite the fact that private equity managers have been slow to embrace SFDR classifications, especially in regions such as the US, they have demonstrated signs of steady progress elsewhere.

LGT Capital Partners found that almost half of private equity managers surveyed (47%) are now addressing climate change through their ESG policies, an increase of 13 percentage points over the last year.

These managers are expressing their commitment to climate action in different ways, with some ESG leaders outlining specific targets for their portfolios.

Source: Citywire Selector