Pantheon Infrastructure: Our approach to climate change analysis in investing

At Pantheon, we have been providing ESG reporting to clients since 2012, undertaking our own fund manager ESG analysis since 2015, and incorporating climate change risk questions into our investment due diligence for primary fund investments since 2018.

As part of our commitment to the ‘E’ of ESG, we believe that investors need clear and comprehensive information on the potential effects of climate change on investments. This includes understanding the implications of rising temperatures and climate-related policy.

In order to improve and increase reporting on climate-related financial information, the Financial Stability Board (FSB) – an international body formed by the G20 that monitors and makes recommendations about the global financial system – established the Task Force on Climate-related Financial Disclosures (TCFD). This was driven by concerns that the risks associated with the transition to a low-carbon economy were being mispriced by market participants.

Pantheon is supportive of this endeavour and for the past three years has been working with a global sustainability-focused consultancy on climate change risk analysis. This analysis has initially been conducted across Infrastructure and Real Assets portfolios, given the assets’ physical nature and particularly long investment horizons.

This assessment has been undertaken at a regional and sector level to highlight key climate-related risks and opportunities across the portfolio. The analysis was not intended to comprehensively assess individual companies within each sector and therefore does not provide an assessment of absolute levels of risk/ opportunity present across Pantheon’s portfolio. Each company may be exposed to different levels of risk and opportunity based upon its individual operations, supply chains and market exposures. Similarly, management teams for each company could employ different strategies to mitigate risk and seize opportunities.

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