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Environmental, Social, and Governance (ESG)

Decarbonization strategies for SMBs in your portfolio

Strategies for small-medium sized portfolio companies to decarbonize their business for added value.

Phased decarbonization approach for investment portfolio companies

With the potential to wipe out up to 18% of the global GDP and 6.9% of the Canadian GDP by 2050, climate change has the ability and is already shifting the way we do business. Globally, industry leaders and regulators continue to push the climate agenda, with an increased focus on climate disclosure, climate risk management and net zero commitments. 

The pace of change has been exponential as climate expectations are increasingly disrupting business-as-usual. As a result, small-medium sized companies are at risk of being left behind and must ensure they have the proper foundations to anticipate increasing decarbonization demands while capitalizing on the competitive advantage a decarbonization strategy can bring. 

To discuss how Private Equity (PE) and Venture Capital (VC) firms can drive value and advance on decarbonization planning across their portfolio companies, the CVCA devoted a recent Invest Canada webinar to decarbonization strategies for PE and VC firms, led by sustainable finance specialists Sander Jansen and Christine Morris from KPMG in Canada.

Jansen and Morris broke down decarbonization trends and terminology, highlighted advantages of addressing climate change, and introduced a five-step phased approach to help small-medium sized portfolio companies tackle climate complexities using a comprehensive and feasible approach. 

The approach provides a comprehensive roadmap for small-medium sized companies to establish and communicate emissions targets, develop, and implement a transition roadmap of specific solutions, and measure and report to gauge overall success. 

Overall, the five-step approach includes: 

  1. Calculating greenhouse gas (GHG) emissions inventory: identify where GHG emissions are being generated across the company’s value chain by quantifying Scope 1, 2 and 3 emissions.
  2. Training leadership: upskill leadership and determine the employees responsible and accountable for implementing a company’s decarbonization strategy.
  3. Forecasting emissions scenarios: understand the effort required to reach net zero by comparing to the company’s business-as-usual forecast against reduction scenarios and efforts. 
  4. Setting targets and prioritizing carbon transition initiatives: set feasible emissions reductions targets supported by analyzing decarbonization initiatives based on their feasibility (e.g., cost, ability to implement) and GHG emissions reduction capacity.
  5. Developing a transition roadmap: develop a tailored carbon initiative roadmap that includes activities and action plans based on timeline and metrics, and identifies any necessary operational changes needed internally.

How KPMG can help

For assistance designing and launching a phased approach that’s tailored to your business, read the full article and connect with us to start the conversation.

Sander Janson
ESG Advisory, KPMG in Canada

Christine Morris
Deal Advisory, KPMG in Canada