I am delighted to have joined ICG. Its track record in investing successfully and its commitment to ESG (environmental, social and governance) leadership are clear, and I am excited for the opportunity to further develop and embed meaningful sustainability action throughout the firm and its investment activities.
The universe of ESG topics facing investors is ever-expanding, and ICG’s challenge and opportunity will be to add value – both societal and economic – through the thoughtful consideration of these ESG factors. The structural trends towards private markets remain intact, with asset owners continuing to increase allocations. With growing AUM over the long term across multiple asset classes, ICG’s opportunity becomes ever-greater to support the development of more resilient, nature-positive and human-centred businesses befitting a low carbon economy and sustainable economic future.
Following a year of important announcements – including ICG’s commitment to net zero by 2040, supported by the establishment of two important approved and validated science-based targets – the Group has focused on embedding the right internal systems to ensure we can make progress against those targets and further embed ESG into decision-making.
For example, this year we put in place a requirement for portfolio managers to attest to the implementation of relevant ESG assessments and procedures for their given strategies, which will be linked to their year-end compensation. This measure not only ensures accountability for ESG integration, but also enables senior investment professionals to set an example for their teams.
We have also seen innovative approaches to aligning our investments and business with our decarbonisation goals. In one year alone, we have seen a 47% increase in the total AUM of sustainably-themed products in real assets. And, in 2022 ICG issued an 8-year, €500m unsecured bond with an annual coupon adjustment based on the progress ICG makes in achieving its science-based targets. This is the latest facility to contribute to our overall total of $3.6bn in ESG-linked financing to date.
In recent years, stakeholders have increasingly demanded that financial institutions play an active role in responding to the climate crisis. Looking ahead, not only will climate change remain a central priority for ICG, but we will make our approach more expansive and sophisticated, ensuring we consider the myriad, interconnected social and environmental factors related to climate. For example, we will explore risks and opportunities related to nature and biodiversity, as well as a just transition.
In 2023 and beyond, we will focus on building and implementing a more comprehensive plan for net zero for the firm. Where we have sufficient influence, we will continue to support management teams in setting science-based emissions reduction targets for their businesses. And, we will work to assess possible solutions for asset classes or strategies within our portfolio where we do not yet have the tools to assess, measure and manage for net zero, where relevant.
We will also seek to expand our integration of additional ESG topics as they become focal areas for our stakeholders and as they are increasingly pertinent to our investments. For example, given the challenges facing societies the world over, we will continue to assess the “S” in ESG – advancing our commitment to progress on D&I, and thinking about how best to assess equity and human rights.
We know engagement must remain a focal point in order to drive stronger sustainability outcomes. ICG will continue to prioritise embedding ESG into our activities, always with an eye towards continuous improvement and action in areas where we can make meaningful impact.
Spotlight on emerging issues
Nature
With more than half of the world’s economic output moderately or highly dependent on nature, the loss of nature and biodiversity poses enormous risks – and opportunities – for economies, and thus for investors. Moreover, nature loss is inextricably linked to the climate crisis, ensuring we cannot achieve net zero without also addressing nature. In 2022, ICG joined the Taskforce on Nature-Related Financial Disclosures (TNFD) Forum, to support the development of a risk management and disclosure framework for organisations to report and act on evolving nature-related risks, with the ultimate aim of supporting a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcomes. We look forward to exploring ways to better incorporate nature-related risks and opportunities into our company engagement and investment considerations.
Human rights
As stakeholders increase focus on the “S” in ESG, there is growing visibility and awareness of the private sector’s responsibilities to uphold and protect human rights. The regulatory and policy environment is increasingly focused on human rights due diligence expectations in investment decision-making, and on the responsibilities of business and institutional investors to respect human rights, as articulated in the UN Guiding Principles on Business and Human Rights (UNGPs). As an alternative asset manager, ICG has a role to play in incorporating human rights considerations into our investment approach, in assessing the important links between human rights and other ESG priorities, such as climate change, and the role we can play in preventing or mitigating potential impacts.
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