How ESG is shaping the economy of tomorrow

Environmental sustainability is changing how people invest and transforming the business landscape, says Jean Rogers, global head of ESG at Blackstone

How has the rise of ESG altered the investment landscape?

Environmental sustainability is an increasingly important part of how organisations deliver value to their customers and shareholders. We believe companies that consider it will ultimately be more resilient and therefore have a competitive edge. The investment landscape looks totally different than it did in previous decades. More capital has been flowing into the ESG space, particularly into energy transition. To reach net zero by 2050, experts estimate that it will take $3.5tn in investments – every year. Investors can and want to play their part.

How are you helping to drive environmental sustainability at Blackstone?

Since it first began operating in Europe 25 years ago, Blackstone has invested over $100bn to back the companies and industries powering the future.

Across our businesses, we see an opportunity to invest an estimated $100bn in energy transition and climate change solutions over the next decade, building on the approximately $16bn we’ve committed to investments we believe are consistent with the broader energy transition since 2019. Several of our platforms enable this investment, including funds within Blackstone Energy Partners, which focus on climate solutions and energy transition in private equity. We do this in two ways: by investing in environmental services companies and by helping companies implement environmental improvements. DESOTEC is an environmental services company that helps industrial companies clean the air, water and soil around their sites through its fleet of 2,700 mobile filters. Last year, this fleet contributed to the reduction of 110,000 tonnes of CO₂-equivalent emissions

We have also invested in the NEC Group, a leading live events business, whose Birmingham campus will deliver one of the largest electric vehicle (EV) charging hubs in Europe, capable of charging 32 EVs at a time in just 15 to 30 minutes.

How can investors work with companies within their portfolio to make them more sustainable?

Some investors leverage existing greenhouse gas footprints to inform their investment decisions, choosing to divest from the highest-emitting companies and assets. Others have set their sights on 2050 and committed to a net-zero portfolio over the course of the next several decades. Both approaches, however, disregard the need for urgent, deep decarbonization during the time of ownership. We believe this can help put companies on a trajectory to make their portfolio more sustainable for the long-term and achieve their goals.
We focus on what we call the carbon delta, or the carbon emissions that we can abate during our holding period.

At Blackstone, we have quantified our work on Greenhouse Gas (GHG) Delta by setting a numeric target focused on actionable improvement over the short term. We have committed to a goal of reducing carbon emissions by 15% in aggregate for all new investments where we control the energy use over the first three years of ownership – a commitment that is informed by climate science and focuses on near-term, urgent reductions.

To measure progress reducing GHG emissions, it is important for investors to have a robust, measured GHG footprint of their holdings. We are investing significant resources in getting this right at Blackstone. Our portfolio includes approximately 12,000 real estate assets and over 250 portfolio companies. A rigorous carbon accounting program is central to understanding our portfolio’s GHG footprint. Our program will allow us to measure progress while also providing our investors with the data they need to measure progress against their climate commitments.

What is the future of sustainability in business and investing?

Meaningful, measurable interventions that are material to a company’s core business model – not just an add-on or nice-to-have – are needed to position a portfolio for the changes of the coming decades and deliver lasting value to investors. We believe that to make a company more sustainable is to make it more resilient and thus competitive. We’re excited about the trajectory Blackstone is on and confident that we have the programs and people today that will help the companies in our portfolio build for tomorrow.

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