Key Takeaways:
- Climate disclosure surges: PE-owned companies disclosing climate impact through CDP increased by 55% from 2021 to 2023.
- Emissions reductions deliver business benefits: Scope 2 emissions dropped 26%, leading to greater efficiency, lower carbon taxes, and stronger customer engagement.
- Five key actions drive success: Decarbonization leaders integrate sustainability with financial performance, set science-based targets, and collaborate across supply chains.
Private Equity’s Decarbonization Momentum
Private equity (PE)-owned companies are accelerating their climate impact disclosures. A Bain & Company study of 824 portfolio companies found a 5% decrease in Scope 1 emissions and a 26% drop in Scope 2 emissions between 2021 and 2023. These reductions are translating into operational efficiency gains and cost savings.
“The number of private-equity–owned companies disclosing their environmental and climate impact through CDP rose 55%.” – Bain & Company
Despite progress, Scope 3 emissions remain a challenge, rising 15% in the same period. This is largely due to improved tracking and expanded reporting categories. Some industries, like infrastructure and hospitality, have managed to reduce Scope 3 emissions, but broader reductions remain difficult.
Five Key Actions for Decarbonization Success
- Align business value with climate impact
Companies that prioritize emissions reduction alongside financial performance see the biggest gains. Those implementing fugitive emissions reduction initiatives cut 52 tons of emissions per million dollars of revenue, compared to a 7-ton increase for those without such programs. - Set science-based targets
Top-performing companies are twice as likely to have science-based emissions targets. Bain found that 35% of leading carbon reducers set these goals, compared to 16% of low performers. Absolute emissions reduction targets outperform intensity-based goals.“Investindustrial is on track to meet its 2026 goal of having science-based targets at half its PE investments.” - Hold leaders accountable
Operational leaders must own emissions reduction efforts. Some PE firms, like One Rock, link 10% of C-suite bonuses to sustainability performance. Companies with Chief Sustainability Officers (CSOs) dedicated to decarbonization outperform those without. - Collaborate on Scope 3 reductions
Supplier and customer engagement is critical. Among manufacturers with top Scope 3 reductions, 92% work with suppliers on emissions cuts. 76% of leading retailers and 84% of manufacturers collaborate with customers to lower emissions.“Jadex trains buyers and sales teams on sustainable sourcing and life-cycle analysis, helping suppliers reduce emissions and drive sustainable product innovation.” - Integrate climate risk into business strategy
Companies proactively addressing climate risks see financial and operational benefits. Constantia Flexibles, a One Rock fund holding, built a floodwall to protect a manufacturing site—saving operations during an October 2024 flood.
Next Steps for PE Firms
Private equity firms can accelerate decarbonization with three immediate actions:
- Assess performance: Establish a carbon baseline and disclose climate goals.
- Map a clear pathway: Use tools like the Private Markets Decarbonization Roadmap (PMDR) to track financial and emissions progress.
- Engage stakeholders: Publicly communicate decarbonization efforts to investors, customers, and regulators to strengthen competitive advantage.
The Bottom Line
Decarbonization is no longer just a compliance issue—it’s a strategic imperative. Leading PE firms are proving that climate action drives financial value, enhances resilience, and strengthens market position in an increasingly low-carbon economy.
Related Article: Private Equity’s Role in Delivering the SDGs
