{"id":2563,"date":"2023-08-15T14:32:57","date_gmt":"2023-08-15T07:32:57","guid":{"rendered":"https:\/\/gunungcapital.com\/?p=2563"},"modified":"2023-08-15T14:33:03","modified_gmt":"2023-08-15T07:33:03","slug":"private-equity-path-in-transforming-grey-assets","status":"publish","type":"post","link":"https:\/\/gunungcapital.com\/zh\/private-equity-path-in-transforming-grey-assets\/","title":{"rendered":"Private Equity Path in Transforming \u201cGrey Assets\u201d"},"content":{"rendered":"<div data-elementor-type=\"wp-post\" data-elementor-id=\"2563\" class=\"elementor elementor-2563\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-11276b8 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"11276b8\" data-element_type=\"section\" data-settings=\"{&quot;jet_parallax_layout_list&quot;:[]}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-a99d6a2\" data-id=\"a99d6a2\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-0ce2c91 elementor-widget elementor-widget-text-editor\" data-id=\"0ce2c91\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.16.0 - 14-09-2023 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<p><span style=\"font-weight: 400;\">Today, a lot of private equity investors see &#8220;grey&#8221; assets, including high emitters, as potential stranded asset risks that should be avoided by using exclusionary screens or divesting. The world&#8217;s problems with long-term decarbonization won&#8217;t be resolved by that strategy, though. In addition, there is a risk (actual or perceived) that private equity may take on the role of the de facto owner of high-emitting assets as public markets put more pressure on companies to sell them off. If this were to happen, the industry would be subject to regulatory and reputational damage.<\/span> <span style=\"font-weight: 400;\">Instead, private equity companies may and must enhance these assets&#8217; sustainability performance, turning them &#8220;from grey to green&#8221;. Because of its full ownership model (which provides operational control and reduces action impediments) and longer time horizon than public markets, the sector is well-suited to fill this function.<\/span> <span style=\"font-weight: 400;\">Despite these structural benefits, the industry isn&#8217;t yet taking use of this potential to a significant degree. Capability gaps, measurement constraints, and holding periods that are too long have all been mentioned as obstacles to effective engagement in sustainable transitions in conversations with industry players.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-1eefcef elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"1eefcef\" data-element_type=\"section\" data-settings=\"{&quot;jet_parallax_layout_list&quot;:[]}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-bfe5279\" data-id=\"bfe5279\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-336a9dd elementor-widget elementor-widget-text-editor\" data-id=\"336a9dd\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><b>Three additional obstacles to the decarbonization of heavy emitters stand out<\/b><\/p><ol><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Lack of sustainability knowledge to analyze the market for chances to alter sustainability and carry out ambitious plans<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Investors are subject to &#8220;headline risk&#8221; due to a lack of measurement standardization that makes it difficult to communicate progress towards goals.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Longer time to get benefits from sustainability, maybe longer than the standard holding period, which discourages ambitious plans<\/span><\/li><\/ol>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-7e14fdc elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7e14fdc\" data-element_type=\"section\" data-settings=\"{&quot;jet_parallax_layout_list&quot;:[]}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-6d6f0f7\" data-id=\"6d6f0f7\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-4a61e61 elementor-widget elementor-widget-text-editor\" data-id=\"4a61e61\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><b>Additional obstacles specific to the decarbonization of heavy emitters<\/b><\/p><ol><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Targets for &#8220;levels-based&#8221; portfolio emissions reductions discourage the purchase and decarbonization of high emitters.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Investors that are concerned about the environment and would decarbonize or retire their assets are outbid by funds looking to make money from heavy polluters.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Due to the lack of societal agreement and supportive policies about the retirement or decarbonization trajectories of heavy emitters, there is a risk that assets will get stranded over the holding period.<\/span><\/li><\/ol>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-6e7e2cd elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"6e7e2cd\" data-element_type=\"section\" data-settings=\"{&quot;jet_parallax_layout_list&quot;:[]}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-7852117\" data-id=\"7852117\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-a1060ed elementor-widget elementor-widget-text-editor\" data-id=\"a1060ed\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">&#8220;As investors and partners, our job is to improve all aspects of a business to drive growth and improve how they operate over the long haul,&#8221; said Kewsong Lee, Carlyle&#8217;s CEO. &#8220;In a world that is changing quickly, that increasingly involves working with businesses to help them perform better on ESG problems. We are ideally suited for this role given our ownership stakes, investment horizon, and knowledge. Five key steps for paving the path to sustainability for private equity are listed below;\u00a0<\/span><\/p><ul><li><b>Invest in competencies and culture: <\/b><span style=\"font-weight: 400;\">For LPs and GPs today, a capability gap is one of the main obstacles to action. One of the most important initial steps in developing institutional capacities is to make sure that the leadership team consists of individuals with relevant operational and conventional investment knowledge as well as a sustainability mentality.<\/span><\/li><li><b>Maintain attention on the long-term plan: <\/b><span style=\"font-weight: 400;\">Creating capabilities and bringing about a culture shift may need some false starts along the way. To maintain momentum, private equity leadership must make use of the larger time horizon flexibility in private markets and optimize for the long-term result, not simply short-term gains, by taking actions like embracing experimentation and extending hold periods.<\/span><\/li><li><b>Share the strategy:<\/b><span style=\"font-weight: 400;\"> along with specific targets along the way: Given the extensive time horizon needed to achieve benefits at the asset and portfolio levels, it is essential to secure and retain buy-in by clearly articulating the long-term objective and progress towards it to all stakeholders. Both standardized metrics and customized reports should be used in this.<\/span><\/li><li><b>Don&#8217;t simply divest; transform:<\/b><span style=\"font-weight: 400;\"> The private equity industry should be able to transform sustainability-laggard assets due to its complete ownership model and flexibility to have a longer-term perspective than the public markets, but so far it has not taken advantage of this opportunity.<\/span><span style=\"font-weight: 400;\"><br \/><\/span><span style=\"font-weight: 400;\">Diversification and sector switching provide immediate gains for a single investor, but they do not exclude assets with low sustainability performance from the global portfolio. By investing money to change these &#8220;grey assets,&#8221; sustainability problems must be tackled head-on.<\/span><\/li><li><b>5-Work together to overcome major obstacles<\/b><span style=\"font-weight: 400;\">: It is impossible to solve measurement problems and provide the correct incentives on your alone. Industry-wide LPs and GPs must keep working together to establish standards and guidelines.<\/span><\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-568266e elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"568266e\" data-element_type=\"section\" data-settings=\"{&quot;jet_parallax_layout_list&quot;:[]}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-318e5fc\" data-id=\"318e5fc\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-a0a1368 elementor-widget elementor-widget-text-editor\" data-id=\"a0a1368\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Private equity investors must adapt to the quickly changing public expectations and aspirations for sustainability.\u00a0<\/span><span style=\"color: var( --e-global-color-text ); font-family: var( --e-global-typography-text-font-family ), Sans-serif; font-size: var( --e-global-typography-text-font-size );\">This creates opportunities for long-term value development in addition to financial, reputational, and regulatory concerns that must be managed. To take advantage of this opportunity, private equity needs to act.<\/span> <span style=\"color: var( --e-global-color-text ); font-family: var( --e-global-typography-text-font-family ), Sans-serif; font-size: var( --e-global-typography-text-font-size );\">These five &#8220;Monday morning&#8221; priorities can be used by private equity leaders as a starting point to ensure that their firms fully understand the significance of their involvement in decarbonizing difficult-to-abate sectors.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t<\/div>","protected":false},"excerpt":{"rendered":"<p>Today, a lot of private equity investors see &#8220;grey&#8221; assets, including high emitters, as potential stranded asset risks that should be avoided by using exclusionary screens or divesting. The world&#8217;s problems with long-term decarbonization won&#8217;t be resolved by that strategy, though. In addition, there is a risk (actual or perceived) that private equity may take [&hellip;]<\/p>","protected":false},"author":1,"featured_media":2575,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"_links":{"self":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts\/2563"}],"collection":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/comments?post=2563"}],"version-history":[{"count":0,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts\/2563\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/media\/2575"}],"wp:attachment":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/media?parent=2563"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/categories?post=2563"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/tags?post=2563"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}