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Loan Note: Lack of climate data troubles investors; alternatives groups join forces on diversity

Why investors are finding it difficult to assess climate-related risk. Plus: organisations come together to find a way forward on diversity and Post Road brings investor on board. Here's today's brief for our valued subscribers only.

They said it

“While the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious”

Taken from a statement from the Washington, DC-based International Monetary Fund regarding the impacts of the conflict in Ukraine.

First look

Lack of data hampering climate change efforts
Investors are finding it difficult to analyse climate risks and report on areas such as net-zero alignment because of issues with the availability of data, according to a report from the European Leveraged Finance Association.

Following a workshop with members, ELFA reported that many found measuring carbon emissions at a portfolio level difficult because not all borrowers disclose the data. This is despite climate change risk being an important part of credit analysis for 57 percent of leveraged finance investors, according to ELFA research.

Private credit participants in the workshop said that the lack of data makes setting targets and metrics, such as those recommended by the Task Force on Climate-Related Financial Disclosures, particularly challenging and net-zero alignment difficult to achieve.

“Measuring the carbon footprint of a portfolio is difficult, if not impossible, when not all borrowers disclose this data,” says Sabrina Fox, chief executive officer of ELFA. “Even where the data are disclosed, borrowers may not do so in a consistent, comparable or timely manner within individual sectors, let alone across sectors. Asset managers are forced to make estimations where gaps exist.”

Alternatives groups join forces in diversity push
The Standards Board for Alternative Investments has brought together a group of alternative investment managers and allocators to try and achieve further progress on diversity in the alternatives industry.

A forum led by SBAI includes the likes of the Alternative Investment Management Association, the European Leveraged Finance Association (see above), the Institutional Limited Partners Association and the Investor Leadership Network.

According to Maria Long, research and content director at SBAI and chair of the forum, there will be three main aims: to avoid duplication of work, to collaborate across organisations where appropriate, and to standardise guidance or templates where it makes sense.

“ILPA believes meaningful DE&I progress at scale for our industry can only be achieved by moving from intention to action, establishing objectives, measuring results, and collectively applying lessons learned,” says Jennifer Choi, managing director, industry affairs at ILPA. “We are eager to support efforts that bring like-minded organisations together to align on objectives and improve outcomes.”

Essentials

Constellation backs Post Road 
Post Road Group, a US alternative investment firm focused on real estate and mid-market corporate strategies, announced that Capital Constellation has acquired a passive, minority ownership interest to support its long-term growth and development. Capital Constellation, a group of global institutional investors which provide investment capital and expertise to growing investment management platforms, is managed by private equity and alternative investment manager Wafra. Terms of the investment were not disclosed.

Post Road said it intends to use Constellation’s strategic and financial support to continue expanding its team, broaden its network of global institutional investors, and build on its track record of investing across real estate, corporate credit, real estate credit and structured equity. The firm said its investment processes, management and day-to-day operations will remain unchanged.

Record fundraising year at AXA IM Alts
Paris-based AXA IM Alts, which has €183 billion of assets under management, said it raised a record €18.2 billion of capital in 2021, including €10.2 billion of third-party commitments, as investors sought strategies generating yields with diversification and reduced volatility.

The capital was raised from AXA IM Alts’ increasingly global client base, with 50 percent of third-party capital raised coming from European and 50 percent from non-European clients for the first time. North America and Asia-Pacific contributed almost equally to the capital sourced outside Europe, with both markets having been key areas of expansion for capital raising and investment for the company in recent years.

The firm said its private debt and alternative credit and real estate equity pillars accounted for a large proportion of the capital raised.

New MD for Star Mountain
Star Mountain Capital, a lender to small- and medium-sized North American businesses, has hired Crandall Deery as a managing director. Deery has worked for Small Business Investment Company funds and for a business development company as well as at the likes of GE Antares Capital, Jeffries, Sanford C Bernstein & Co and PricewaterhouseCoopers. He becomes Star Mountain’s 12th full-time managing director.

LP watch

Institution: Minnesota State Board of Investment
Headquarters: St Paul, US
AUM: $94.1 billion
Allocation to alternatives: 17.4%

Minnesota State Board of Investment approved $400 million-worth of private credit commitments across three vehicles at its February board meeting, a contact at the pension confirmed to Private Debt Investor.

The organisation made commitments of $100 million each to HPS Strategic Investment Partners V and Värde Fund XIV, as well as $200 million to Oaktree Special Situations Fund III.

MSBI currently allocates $1.04 billion to private debt investments, comprising 1.1 percent of its total investment portfolio. The organisation’s recent private debt commitments have focused on distressed, mezzanine and senior debt vehicles that invest mostly in the corporate sector globally.



Today’s letter was prepared by Andy Thomson with John Bakie and Robin Blumenthal.