November 2, 2023
We all agree: companies need to reduce their carbon emissions. But by how much do CO2 emissions have to be reduced to make a difference? To answer that question, we set reduction targets and had them validated by the Science Based Targets initiative (SBTi), an organisation that helps companies scientifically substantiate their targets.
By 2030, as a family office, we aim to reduce our own CO2 emissions by 46% compared to 2019. We also want to curb our indirect emissions. In 2021, we decided to commit to the Science Based Targets. These are science-based targets that allow companies to thoroughly analyse their emissions and reduction plans. “We wanted to make sure our CO2 reduction plans were ambitious enough,” says Project Manager Sustainability Mark Schravesande. "The Science Based Targets initiative (see below) was still relatively new at that time, but already well on its way to becoming the global standard.”
“Worldwide, we were among the first 20 financial institutions willing to commit. Our validation process was part of a pilot to test initial guidelines for the financial sector. Not everything was clear yet, which made the formulation of our targets quite challenging.” During the validation process, the SBTi published an initial version of a separate set of guidelines specifically for private equity organisations. “We adjusted our calculation and wording accordingly.”
VP Capital did already have a good overview of its carbon footprint. “Since 2018, we have been calculating our carbon footprint annually in collaboration with consultancy firm CO2Logic. We do this in accordance with the globally recognised methodology of the Greenhouse Gas Protocol.” That protocol divides emissions into three scopes.
- Scope 1: direct emissions from business activities.
- Scope 2: indirect emissions from purchased energy. Through our energy consumption, we influence emissions from, for example, the power plant where we buy electricity.
- Scope 3: all other emissions resulting, indirectly or otherwise, from business activities.
In 2022, our carbon footprint was 8,896 tCO2 equivalent. Our scope 1 and 2 emissions were 20 tCO2 – almost negligible compared to that of our total footprint including scope 3. “In fact, our office in Goirle runs entirely on renewable energy, with biomass heat and green electricity. In addition, by 2020, most staff lease cars were already fully electric. The remaining emissions come from some non-fully electric cars and gas consumption for heating our office in Turnhout.”
Scope 3 emissions consist, for example, of business travel and purchased products and services, as well as scope 1 and 2 emissions from all the companies in which we invest. “They are, however, in proportion to our investment share. An example: for an investment in which we have a 10% share, we also include only 10% of scope 1 and scope 2 emissions in our own scope 3 emissions. We exclude scope 3 emissions from our portfolio companies. We do, however, encourage portfolio companies to identify and reduce their scope 3 emissions.”
“It remains a major challenge to quantify the emissions from all our investments. In 2022, for the first time, we were able to include the carbon footprint of all direct investments in our scope 3 emissions, including listed companies. In total, we managed to include 80% of the invested capital. Only fund emissions still fall outside that scope for now.”
“We offset our CO2 emissions – scope 1, 2 and a large part of scope 3 – through CO2Logic by financially supporting four projects: a project in India for the construction of wind turbines, a project in India around the supply of efficient burning cookstoves, a sustainable timber plantation project in Sierra Leone and a reforestation & conservation project in Zambia. In that way, for three years we have been a CO2 Neutral Company.”
VP Capital has defined the following SBTi-validated targets:
“For some goals we are well on track, for others we still need to step up. In 2022, we managed to reduce our own emissions by 22% compared to 2019. For our real estate investments, it was no less than a 25% reduction.”
“We have a lot of work ahead of us”, concludes Mark Schravesande. “For example, to reduce our own emissions, we are going to replace the remaining hybrid cars in our fleet with fully electric ones. Because, as a small tenant, there are few measures we can take with regard to our office in Turnhout (although we are trying to encourage the switch to sustainability there, as well), so replacing these cars is the only reduction still possible.”
“In addition, we encourage our listed and direct portfolio companies to set their own Science Based Targets. We could have chosen to set a carbon reduction target for our portfolio. But we decided to convince our investments to get SBT targets validated themselves. That will hopefully create greater commitment among companies.”
Since VP Capital invests a large portion of its capital directly, we went to work with those investments first. “We offer advice and support based on the knowledge we have accumulated ourselves. And successfully, because Mediahuis and Batenburg Techniek have committed and are in the process of setting validated targets. The SBTs of Q-lite, Hydrowear and HAVEP have already been validated. Among listed companies, in which we generally invest little, none are yet willing to commit, even though we strongly encourage it. We will still have to work hard to achieve this through dialogue and support.”
A real challenge
The real estate target remains a challenge. “The journey to validation proved to be very intensive. Often, data was not available and we had to estimate the carbon footprint of our properties. The SBTi also offered little methodological support in that area at that time. In the end, it took us more than a year to have a good overview.”
“Moreover, the results of the SBT tool showed that a greater reduction was needed than we initially thought. This is a tough sell, especially since a large proportion of the properties we invest in directly is already above average in terms of sustainability. Take for example HAVEP’s new building.”
“For properties we invest in directly, we commission energy scans and engage with the co-owners and/or tenants. For new tenants, we already include agreements on green electricity and sharing consumption data in the lease. We will pre-screen new investments in direct real estate to check that they are in line with our SBTs.”
“The biggest stumbling block is that we invest part of our capital in real estate funds, over which we have limited influence. We therefore explicitly chose to engage with fund managers and encourage them to become more sustainable. In many cases, management turned out to be on the same wavelength.”
Apart from the fact that we still have plenty of work to do to achieve our targets, the SBTi also requires the targets to be reviewed every 5 years. “And that is necessary, because the organisation continues to develop new guidelines and sharpen the existing ones. For instance, we know that a new version of the guidelines for financial institutions is on its way. This changes the way in which targets must be calculated for various asset classes.”
“In addition, we look forward to the net zero guidelines for financial institutions by 2050 (at the latest). One difference with the near-term targets (for 2030) would be that they would not only look at emissions reductions from funded (climate-negative) activities, but also at funding climate-positive activities. As soon as we can, we certainly want to commit to that as well. Even though these longer-term guidelines are not yet known, we expect that at least around 90% of our portfolio companies will have to commit to the SBTi. Therefore, it makes no sense to wait until the final guideline is known – whether it will be 80, 90 or 95%, we must continue to encourage our portfolio companies to work on it regardless.”
There will also be a separate set of guidelines for real estate or investing in real estate. “The way emissions from our property portfolio are calculated will therefore still change. SBTi is also devising guidelines for specific sectors, such as textiles and agriculture. This, in turn, is relevant to our portfolio companies. We are already keeping a close eye on the latest developments.”
The Science Based Targets initiative
Many companies and financial players, like us, want to calculate how much and how fast they need to reduce their greenhouse gas emissions to avoid the worst effects of climate change. Those who want to do so according to the latest scientific knowledge can turn to the independent organisation Science Based Targets initiative. The SBTi helps companies set reduction targets and validates the targets if they match the reduced emissions needed to meet the Paris Agreement target and thus limit average global warming to 1.5°C.