Apollo Global Management Inc. has for the first time revealed the carbon emissions linked to some of its investments, a rare step underlining the financial industry’s plodding progress in making such disclosures.The alternative asset manager disclosed so-called financed emissions of 3.9 million tons of CO2 equivalent emissions for $39.4 billion of its assets across private equity, infrastructure and hybrid value investments. That’s equivalent to the annual greenhouse gas emissions of 870,000 passenger vehicles. Apollo's investments in the manufacturing, utilities and transportation and warehousing sectors produced the greatest emissions, according to the firm’s sustainability report published June 21.Financed emissions are those enabled by lending and investing activity. As they make up the bulk of a financial firm’s climate impact, reducing them is necessary to meet a net zero pledge. Few firms so far have disclosed the full scope of the planet-warming emissions they finance, partly because the task is fiendishly complex. Until that information is known, the true scale of the climate task facing the finance sector is obscured—and can’t be properly tackled.Apollo hasn’t made a net zero commitment, and its disclosed financed emissions relate to only 7% of the $598 billion in assets it oversaw at the end of March. Yet it believes the initial disclosure will give investors and limited partners a better view on the carbon footprint of the firm’s portfolios.“At this juncture, the number isn’t the most important thing,” Dave Stangis, partner and chief sustainability officer at Apollo, said in an interview. “It’s how do we onboard this capability and how do we build expertise and familiarity.”
The New York-based firm says it has teamed up with carbon accounting platform Persefoni, and has begun to invest in other tools and processes required to collect and calculate the data. It intends to increase disclosures over time.Just as many companies find it hard to pin down emissions linked to their far-flung supply chains, fund managers can struggle to calculate the carbon pollution enabled by providing capital to companies. Apollo said data obtained from its portfolio companies can be inconsistent, incomplete and out of date.
“It’s continuous improvements,” said Stangis. “If we waited for perfection, the sustainability report would be a page long.”
Apollo also said it has begun to implement the Partnership for Carbon Accounting Financials financed emissions standard, a widely-used tool for calculating the CO2 enabled by loans and investing. BlackRock Inc. and HSBC Holdings Plc are among financial institutions to calculate financed emissions data using the PCAF standard.Kentaro Kawamori, chief executive officer and co-founder of Persefoni, said that while it isn’t tricky to do the sums, getting accurate data for the calculation of financed emissions “is the really hard part.”Despite the challenges, a growing number of financial firms are beginning to disclose financed emissions data. Earlier this month, Oak Hill Advisors, the $60 billion alternative credit manager, said it had partnered with Persefoni to help it estimate financed emissions, including those associated with its flagship liquid credit fund. A spokeswoman for Oak Hill declined to provide details.Financial firms have a big role to play. According to Kawamori, large private market investors can use their clout as company owners to compel portfolio companies to disclose their carbon footprint, while asset owners can insist that emissions disclosures be included in debt covenants for their private credit businesses.“When you think about financed emissions, no one wants large emissions going in the wrong direction,” Stangis said.
(Adds reference to PCAF in ninth paragraph.)
