The Private Markets Decarbonization Roadmap (PMDR) is a voluntary framework developed “by GPs for GPs” to help private equity firms assess, manage, and communicate how portfolio companies are progressing on decarbonization goals. The foundation of the Roadmap is its Alignment Scale, which provides an industry-consistent approach to assist GPs in assessing where PortCos are on their decarbonization journeys, with the ultimate goal of incentivizing climate action. Reliable carbon data is crucial for implementing the Roadmap.
PMDR: Private Markets Decarbonization Roadmap
Climate-related risks are a growing concern for private markets. A GP’s ability to monitor and reduce emissions in their portfolio has fiduciary implications — from ensuring regulatory compliance among PortCos to enhancing their ability to attract further capital. Yet as GPs attempt to manage climate risks and opportunities, they have faced a pervasive set of hurdles.?
The was developed to address these challenges. The voluntary framework provides a standardized approach to climate disclosure and analysis, with the goal of helping private equity firms assess, manage, and communicate how portfolio companies are progressing on decarbonization goals.?
In this article, we provide an overview of key elements of the PMDR (the “Roadmap”) and outline the steps GPs can take to incorporate its guidance efficiently and effectively.?
Background: Why Was PMDR Created?
A framework “for GPs by GPs”
In 2023, the Initiative Climat International (iCI) and the Sustainable Markets Initiative’s Private Equity Task Force launched the PMDR with support from Bain & Company. The effort was the result of a large-scale collaboration, with consultation from more than 250 GPs, LPs, and other stakeholders, including CDP, Ceres, Glasgow Financial Alliance for Net Zero (GFANZ), The Institutional Investors Group on Climate Change (IIGCC), Institutional Limited Partners Association (ILPA) and Principles for Responsible Investment (PRI).?
The authors sought to provide a simple, workable approach to carbon classification and disclosure, developed “for GPs by GPs.” They intended for the Roadmap to provide interoperability, so those using it could streamline responses to other industry questionnaires and reporting standards; it was developed in close consultation with EDCI and CDP, creating a bridge between the frameworks.?
An updated Roadmap was released in November 2024. adds enhancements like asset-class-specific considerations for growth, VC, and real estate, along with a new support tool designed to facilitate portfolio classification and disclosure.?
“The Roadmap, at its core, is a common language for firms to use to communicate to stakeholders where their portfolios are on their decarbonisation journey.” -
A Common Set of Challenges
Data scarcity, unclear pathways, polarization
The PMDR offers a response to common climate disclosure hurdles faced by GPs. These include data scarcity, unclear pathways to net zero, and growing polarization about the role of decarbonization in investment decisions.?
The Roadmap seeks to address these challenges by expanding decarbonization transparency in a given investor’s portfolio, supporting more effective analysis and objective-setting, and creating consistency within the private equity industry.?
The Roadmap provides GPs with a method to balance decarbonization priorities with fiduciary duties, define a clear path for reaching climate targets, and identify effective decarbonization levers. It is voluntary and optional and can be used for funds at the GP’s discretion. However, to ensure clear and consistent communications, it’s recommended that GPs apply the framework universally across all funds and PortCos.?
What is the PMDR Alignment Scale?
An industry-consistent approach to classifying PortCos
The foundation of the Roadmap is its Alignment Scale, which provides an industry-consistent approach to assessing where PortCos are on the decarbonization trajectory, with the ultimate goal of incentivizing climate action.?
The Alignment Scale asks three questions that determine how GPs should classify portfolio companies:
1. What measures has the company taken to reduce greenhouse gas emissions?
Here, GPs analyze their PortCo’s emissions reporting processes and decarbonization plans, establishing a baseline and source for scope 1, 2, and material scope 3 emissions. GPs can then assess the PortCo’s responses against the Alignment Scale criteria to determine its standing.?
2. Is there a recognized transition pathway for this company?
To answer this question, GPs will consider whether a company’s operations, value chain, and sub-sector could align with net-zero goals. If transition is not feasible, the PortCo will be classified as having “No current pathway to Align.”?
3. Do the company’s operations enable the net-zero transition?
This is where a GP will evaluate a PortCo’s climate solutions and initiatives to transition to a low-carbon economy. If the company’s products or services are helping the broader transition to net zero, it will be categorized as a “Decarbonization Enabler” or “Emerging Decarbonization Enabler.”?
Detailed guidance on classifying PortCos can be found in .?
Key PMDR Concepts
Three criteria for prioritizing decarbonization efforts?
The Roadmap is intended to be applied widely, but its applicability will differ depending on specific asset classes, funds, and PortCos. To help GPs determine where to focus their efforts, the Roadmap uses three key criteria:?
1. Materiality
Risks and opportunities that could substantially affect a fund or PortCo’s impact on climate change
2. Maturity
The availability of guidance and commonly accepted approaches for decarbonization?
3. Feasibility
The GP’s ability to influence PortCo’s decarbonization journey and the number of decarbonization levers available?
Steps for Applying the PMDR
Assess, Classify, Prioritize, Track, Communicate
The Roadmap allows GPs to track progress over time and offers flexibility in how they disclose decarbonization performance, so they can use metrics that are relevant for their specific needs. It provides specific guidance for implementation at the asset-class, PortCo, and fund levels (for details, see ).
At a broad level, implementation of the Roadmap can be broken down into five key steps:
Step 1: Assess Decarbonization Status
GPs should start with a baseline understanding of the portfolio’s emissions profile. By obtaining carbon data from PortCos, they can assess how their deployed capital aligns with the low-carbon transition. Emissions data will underpin all future disclosure and decarbonization efforts, so it’s important to establish reliable carbon accounting early on. To streamline data exchange, firms can share a free carbon accounting platform like 麻豆原创 Pro with PortCos.?
Step 2: Classify Portfolio Companies
The next step is to apply the PMDR Alignment Scale (described above) to classify PortCos based on their decarbonization progress. GPs should classify companies as soon as possible (ideally in the due diligence stage) so they can capture all progress made from the point of investment on. It’s worth noting that the Alignment Scale is dynamic and allows funds and PortCos to show progress even in cases where emissions are currently rising or businesses are undergoing transformation. It’s also possible to demonstrate progress during the hold period and by committing to potential benefits post-fund exit.?
Step 3: Prioritize
After the classification stage, GPs can prioritize which PortCos they will engage in decarbonization efforts. This is where the PMDR concepts of materiality, maturity, and feasibility come in. If a fund includes heavy-emitting sectors, GPs will likely want to concentrate on mitigating risk by moving these PortCos up the Alignment Scale. They may choose to de-prioritize low-emitting PortCos.?
Step 4: Track Progress?
GPs can provide support and guidance to PortCos to help them move up the Alignment Scale. To progress, companies will need reliable data and board-approved plans for decarbonizing or transitioning. A PortCo can’t advance its standing without a certain level of data quality — this is why it’s crucial to start with rigorous carbon accounting and a platform that allows PortCos to increase data granularity and completeness over time.?
Step 5: Communicate?
Those applying the Roadmap at a fund level can decide how to engage stakeholders and how much to communicate. Some may use the Roadmap strictly for internal baselining and prioritization. Others may share data just with LPs, shareholders, and internal stakeholders — this means those without a clear decarbonization path can opt not to announce their plans publicly. A GP can also make a public commitment to decarbonization without setting a specific alignment goal, or, if they are further along on the trajectory, they may choose to set a specific short-term target for a fund or portfolio’s overall alignment level.?
"Tracking Scope 1, 2, and material Scope 3 emissions is an important first step for PortCos looking to decarbonise. The process helps companies to understand which part of their operations are most high-emitting and allows then to benchmark versus companies operating in similar sub-sectors.” -
Managing Risk and Building Value
The PMDR provides a practical tool for GPs to navigate the complexities of decarbonization, communicate with stakeholders, and build portfolio resilience.?
Reliable carbon data is crucial for implementing the Roadmap. It is also the basic building block for developing credible decarbonization plans, which ultimately help mitigate exposure to climate risk and protect and build business value.?
