Fullerton Fund Management and the United Nations Development Programme (UNDP) have launched a framework to guide private equity climate investing in Asia.
Private equity investors can refer to the framework about how to integrate sustainability considerations and the UN Sustainable Development Goals (SDGs) into their strategy, management, transparency and governance practices, in order to achieve their decarbonisation goals.
Fullerton says that to their knowledge, this is the first time that the UNDP has partnered with an asset manager to co-author a private equity paper on climate investments.
Climate investors can now conduct a critical evaluation of the various possible investment practices and decide on the unique set of practices which aligns best to their investment mandates and stakeholders’ requirements.
Fullerton says this framework will be applied to the firm’s Carbon Action Fund, in which the investment team will apply the framework throughout the entire investment cycle of each transaction.
The Carbon Action Fund raised US$100 million ($136.67 million) in its anchor close, which was announced in late March. Temasek-owned Seviora Group and Income Insurance are its anchor investors.
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According to Fullerton, the addressable market size for green businesses in Asia is targeted to reach over US$4 trillion by 2030.
Governments have made strong commitments to decarbonise their economies, but around US$53.5 trillion of investments between 2020-2060 is required to meet the net-zero targets that have already been announced, Fullerton adds.
There are significant investment opportunities ahead and private equity can play a pivotal role alongside public spending in bridging the funding gap, according to Fullerton. However, disclosure standards in the region are uneven and corporate disclosures remain lacking, which poses challenges for climate investors who are looking to assess the material environmental issues for investments.
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Tan Huck Khim, deputy chief investment officer and head of alternatives at Fullerton, says that the firm is committed to integrating sustainability considerations in their private equity 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 optimise decarbonisation in the region,” says Tan.
The private sector has a significant role to play in accelerating Asia’s decarbonisation, including collaborating with actors in the public and multilateral domains, says Haoliang Xu, Under-Secretary-General of the UN and associate administrator of the UNDP. “Recognising this, we are delighted to collaborate with Fullerton Fund Management to develop this Sustainability Management Framework, leveraging the UNDP’s SDG Impact Standards for private equity funds.
