Driving Value and Reducing Risk with our SBTi Commitment

Palatine has advanced its trailblazing approach to sustainability by setting ambitious Science-Based Targets for reducing greenhouse gas emissions in its own business and across its portfolio of fast-growing mid-market businesses. 

Recently, Palatine further solidified its position as the sustainability pioneer within the mid-market, as the firm’s carbon reduction targets were successfully validated by the Science Based Targets initiative (SBTi). We spoke with Head of Sustainability Stephanie Wall to find out what this might mean for the firm and the wider portfolio.

What is the Science Based Targets Initiative (SBTi)?

The SBTi is a climate action organisation and global collaboration between the CDP, the United Nations Global Compact, World Resources Institute and the World Wide Fund for Nature. It was established to accelerate companies’ efforts in urgent climate action and lead the transition to a net zero economy.  It defines and promotes best practice in carbon emission reductions and develops standards, tools and guidance to help companies and financial institutions to set science-based targets in line with the latest climate science and The Paris Agreement in pursuit of limiting the temperature increase to 1.5°C above pre-industrial levels. Setting a science based target, validated by the SBTi is considered to be the ‘gold standard’ of climate targets.

What are Science-Based Targets?

Science-based targets show companies and financial institutions how much and how quickly they need to reduce their greenhouse gas (GHG) emissions to prevent the worst effects of climate change. Emission reduction targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement, which is to limit global warming to 1.5°C above pre-industrial levels.

Why is it an important initiative?

Through the 2015 Paris Agreement, world governments committed to limiting global temperature rises to well below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C.  In 2018, the Intergovernmental Panel on Climate Change (IPCC) warned that global warming must not exceed 1.5°C above preindustrial temperatures to avoid the catastrophic impacts of climate change. To achieve this, GHG emissions must halve by 2030, and drop to Net Zero by 2050. Everyone, therefore, has a role to play in ensuring this happens, including Palatine and the businesses we invest in.

Committing to the SBTi is not only the right thing to do for our planet and society but it’s also an important part of our long-term strategy to drive sustainable business growth through how we invest in, and work with, our portfolio companies.

It’s also important given the unwelcome rise of Greenwashing – the practice of businesses making misleading statements about the sustainability credentials of their products and services for financial or reputational gain. This makes it crucial that investors and consumers can look to independent measures of environmental performance to have confidence in understanding what businesses are doing to contribute to decarbonisation. The SBTi is a highly credible and independent measure of climate action, so we see our commitment as an important statement of intent.

What has Palatine committed to?

By 2030 we will reduce Palatine’s own greenhouse gas emissions by 42%. The SBTi refers to these as Scope 1 (direct emissions from company-owned and controlled resources) and Scope 2 emissions (indirect emissions from the generation of purchased energy, from a utility provider).

But we are also setting targets for our Scope 3 emissions –as a private equity investor, our Scope 3 emissions relate to our financed emissions and therefore the ghg emissions associated with our our portfolio companies’ operations.

We have committed that by 2032, 100% of our portfolio companies will have their own Science-Based Targets (SBT) validated by STBi. Our aim is to have 60% of our portfolio engaged in the STBi process by 2028.

Why has Palatine committed to the SBTi?

Not only is it the right things to do but we’ve long held an evidence-based belief that companies that embed sustainability into their operations are more successful and resilient.

That belief has underpinned the progress we’ve made to date – from establishing a robust ESG framework over a decade ago, to launching our first pioneering Impact Fund in 2017 and becoming an accredited B Corp in 2022.

Committing to the SBTi will drive value within the operations of our portfolio companies and attract impact-driven businesses to the portfolio. It will reduce risk through our exposure to expected changes in environmental legislation. Ultimately it will help us to continue to deliver strong returns for our investors.

We look forward to sharing our progress against these targets, as we work to drive sustainable growth and positive impact across our portfolio and investment strategy.