The role of private markets in addressing climate change: new white paper published

10 March, 2021

The London Institute of Banking & Finance, in partnership with Aviva Investors, has today published a new white paper on how private markets can help address climate change.

climate-related stress testing webinar With growing evidence that sustainable funds outperform the wider market, an increasing number of institutional investors are looking at the role real assets and private markets can play.

In the white paper, Investing with ‘carrots’ and ‘sticks’: generating maximum impact through ESG-linked loans and ESG covenants, Stanley Kwong from Aviva explains different incentives and deterrents. That includes deterring carbon intensive activity, as well as investing in 'green' and sustainable finance.

Mr Kwong argues there’s a real market opportunity for investors that can harness strong ESG structuring and mitigating solutions. He says that while this form of financing is still developing, it has the potential to inspire new templates for investing and lending in public markets.

Chris McHugh, Director of the Centre for Sustainable Finance at LIBF says:

“When we write about financial markets we often think of the traded debt and equity of large publicly quoted corporations. An equally important part of the financial system are the private equity and lending markets.

“These private markets are different due to low liquidity, closer client relationships and more concentrated ownership of both debt and equity. These characteristics change the power balance between companies and their debt and equity investors.

“This can be particularly true of direct investments into physical ‘real assets’ such as infrastructure and real estate. This paper highlights the important developments in this sector.”

Stanley Kwong, ESG Associate Director, Real Assets, at Aviva Investors, says:

“Real assets have a critical role to play in tackling climate change and supporting the transition to a zero-carbon economy, particularly given the long-term nature of investments into the asset class.

“Whilst we have seen positive signs from investors wanting to achieve those ambitions, progress must move from conceptual dialogues regarding impact to the implementation of practical solutions. Adopting a ‘carrot and stick’ approach is a necessary part of the ESG toolkit within private markets which we believe will help turn project commitments into tangible actions and outcomes.”

Notes to Editors

The paper’s author, Stanley Kwong, leads ESG origination and impact at Aviva Investors Real Assets. His ESG expertise spans across the private markets including real estate, infrastructure, private debt and private equity.

Download the white paper: Investing with ‘carrots’ and ‘sticks’: generating maximum impact through ESG-linked loans and ESG covenants

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About LIBF

  • The London Institute of Banking & Finance has been at the heart of the finance sector since 1879.
  • We are the only professional body in the finance sector with Taught Degree Awarding Powers, providing undergraduate and postgraduate degrees for students aiming to pursue a career in banking and finance.
  • We’re also an awarding body for a range of professional qualifications in retail and commercial banking, investment, regulated advice, and trade finance, in the UK and internationally. 

About Aviva Investors

  • Aviva Investors is the global asset management business of Aviva plc.
  • The business delivers investment management solutions, services and client-driven performance to clients worldwide.
  • Aviva Investors operates in 14 countries in Asia Pacific, Europe, North America and the United Kingdom with assets under management of £366 billion in assets as at 31 December 2020.