Stonepeak Announces Industry-Leading ESG Commitments, Building Upon Firm’s Existing Responsible Investing Program
Applies ESG-linked performance compensation to core infrastructure strategy
Represents first mainstream, at scale application of ESG-linked performance compensation outside of the impact investing space
NEW YORK, NY – March 10, 2022 – Stonepeak, a leading alternative investment firm specializing in infrastructure and real assets, today announced industry-leading ESG commitments alongside measurable and reportable plans to achieve them, including rigorous sustainability targets and the introduction of related performance incentives. Stonepeak has long been focused on substantively and transparently incorporating sustainability and responsible investment considerations across the firm’s and its investments’ operations and is committed to continuing to drive significant and lasting ESG results.
Stonepeak’s Net Zero Commitments
Stonepeak is a signatory to the Principles for Responsible Investment, the Task Force on Climate-Related Financial Disclosures, and joined the Net Zero Asset Managers (NZAM) initiative in November 2021. Under the NZAM initiative, the firm has committed to work with its partners on decarbonization goals consistent with an ambition to reach net zero emissions by 2050 or sooner across its assets under management.
In addition to aligning itself with these widely recognized ESG frameworks, Stonepeak has established plans to achieve its net zero commitments and implementation is well underway, including:
- Reducing firm-level emissions by more than 50% by 2025 vs. a 2019 baseline;
- Utilizing Science Based Targets as the standard for all Stonepeak-controlled portfolio company emissions reduction plans, with third-party verified 1.5°C Net Zero-aligned emissions reduction plans established for controlled portfolio companies within two years of acquisition, including interim targets;
- Driving further alignment by attributing a portion of senior management discretionary compensation at both the firm and portfolio company levels towards the achievement of specific emissions reduction goals and other ESG KPIs; and
- As further described below, incorporating an ESG-linked performance incentive into the firm’s investment strategies, starting with the firm’s core infrastructure strategy.
Embedding ESG-Linked Performance Compensation into New Core Infrastructure Strategy
In an effort to further drive holistic alignment on ESG across the firm, its stakeholders, and its portfolio companies, Stonepeak is incorporating ESG-linked performance compensation into its new core infrastructure strategy that deeply embeds economic incentives tied to tangible sustainability outcomes. This represents the first mainstream, at scale application of ESG-linked performance compensation outside of the impact investing space.
Stonepeak’s core infrastructure strategy will utilize permanent capital to target assets with long-term, inflation-linked revenue streams across the energy transition, communications, and transportation sectors. Stonepeak will work with management teams to set transparent and rigorous asset-specific targets across three KPIs tied to GHG emissions reductions in line with Science Based Targets, gender diversity, and worker health and safety. Progress against those targets will be measured on an annual basis, verified by third parties, and reported upon. In the event that these targets are not met, Stonepeak will forfeit a portion of its performance compensation from the strategy, and in the event of ESG outperformance relative to specific targets, Stonepeak’s performance compensation would be adjusted upward. Stonepeak believes that the long duration and essential nature of the core infrastructure strategy’s target investments make it an ideal setting to implement this innovative performance structure.
Stonepeak CEO, Chairman, and Co-Founder Michael Dorrell said, “We know economic incentives are powerful and predictable drivers of behavior and that we can meaningfully accelerate progress against global sustainability goals by creating transparent mechanisms to assess performance and place a portion of our economics as a manager at risk. While historically confined to the impact space, we believe ESG-linked performance compensation structures will become a more widely utilized tool across mainstream private equity strategies over time given their ability to directly align ESG performance with economic outcomes for investment managers.”
Stonepeak expects that ESG-linked incentives will feature in the firm’s future investment products.
To learn more about Stonepeak’s approach to ESG and access the firm’s 2021 ESG Report, please visit https://stonepeak.com/responsibility.
Stonepeak is a leading alternative investment firm specializing in infrastructure and real assets with approximately $46 billion of assets under management. Through its investment in defensive, hard-asset businesses globally, Stonepeak aims to create value for its investors and portfolio companies, and to have a positive impact on the communities in which it operates. Stonepeak sponsors investment vehicles focused on private equity and credit. The firm provides capital, operational support, and committed partnership to sustainably grow investments in its target sectors, which include communications, energy transition, power and renewable energy, transport and logistics, and water. Stonepeak is headquartered in New York with offices in Austin, Hong Kong, Houston, London and Sydney. For more information, please visit www.stonepeak.com.