It was only a few months ago that Kilara Capital reached first close on its climate-focussed private equity fund.
They raised $34 million and so far they’ve deployed $17 million across four companies.
And most impressively, they’ve also released their inaugural impact report, which offers a refreshingly in-depth look at the impact of their portfolio companies, but also, a tentative exploration of the impact performance of the fund as compared to their global peers.
The Kilara Impact team, led by Dr Jodi York, has a stated commitment to impact transparency. But they go further by applying an impact hurdle that commits the firm to reduce C02e emissions by 15% (which is double that of the Paris Agreement).
The impact report explores the emissions mitigation progress for three of their portfolio companies. It assesses a quantitative reduction (which represents scale of change) and reports year on year change (the pace of change). The approach aligns with the IMP’s five dimensions of impact, but it also embraces the GIIN’s COMPASS methodology, which allows for more comparable assessments.
The COMPASS model can also be used to weigh impact results based on the size of the business and its enterprise value. This not only allows an investor to understand the contribution of their capital on delivering this impact, but it also ‘normalises’ the data so it can be compared within a portfolio, or across a peer group.
At a portfolio level, they had the following results:
Investee size:
- the portfolio companies mitigated an average of 12 kg CO2-eq for every dollar of enterprise value in FY22
Investment size:
- every dollar of Kilara Growth Fund’s (KGF) equity is associated with 100+ kg of CO2-eq avoided by investee companies in FY22; and
Proportion of investment:
- Based on its relative investment size in the three companies, 77,977 tonnes CO2- eq of mitigated emissions can be reasonably attributed to Kilara’s investment (of the 1,866,022 tonnes CO2- eq mitigated by the three investee companies). This is KGF’s investor contribution to the climate mitigation outcomes achieved by portfolio companies.
Without context, these results are difficult to judge, but the Kilara report takes careful steps to compare their results with a rich dataset coming from the GIIN. The GIIN published carbon mitigation performance results from 386 unique investments.
It accounts for variability in factors like asset class, geography and business stage, and while the sample-size is small, it offers one of the first opportunities to compare impact performance.
Kilara’s three investments mitigated 622,007 tonnes CO2-eq, which is considerably larger than the private equity comparison group which avoided or reduced an average of 199,983 tonnes CO-e emissions annually.
This work is a valuable contribution to the global practice of impact measurement and management.
Impact measurement is not easy, but as a global dataset emerges, it’s exciting to see the prospects of genuine comparisons being made of impact performance, to both attract more investors to measure impact, and drive greater emissions reductions.