Rapid costed decarbonisation, what it costs, who delivers it, and how to know it will work

Most portfolio companies now have a footprint, a target and a climate plan. Far fewer have a costed answer to the questions that release capital, which levers, at which sites, delivered by whom, over how long, and with what payback.

That gap is where most portfolio decarbonisation stalls, and in private equity that is against the clock. A project identified late in the hold may never reach operation, or may deliver too little evidence to count at exit.

This article is about closing that gap quickly. Not with another strategy document, but with numbers a CFO can interrogate.

Start free, then get selective

Taking every portfolio company through a costed assessment is neither necessary nor realistic. ESG teams are stretched, and the data gathering alone would hold things up. The sequence that works in practice has two steps.

1. First, an energy check-up across the whole portfolio. This is a light, free screen that uses a smart tool, readily available information to locate the energy hotspots, the obvious risks and the likely action areas. No data dump required. It tells the sponsor where costed work is worth doing at all.
2. Second, rapid costed assessment on a shortlist, typically up to five companies at a time. The shortlist is usually the highest energy spenders crossed with the highest likely return on investment. The first comes straight out of the check-up; the second comes from an experienced read of it. Rapid costing does need activity data, and that is a constraint; how many buildings, how much energy and fuel, how many vehicles and how far they travel, what machinery, what product volumes.

A footprint and a target are useful but not sufficient, and getting this data out of portfolio companies is the main thing that slows the work down. Which is why you do it for less companies where it will make a difference, not all.

What the levers actually are

Investors are entitled to ask advisors to be specific, so here is our view.

• Lighting, building and equipment controls are often the first to be assessed as these are the most proven to work, and with a manageable risk register.
• Solar PV generation works in most cases, coupled with battery storage (yet to become a commodity) where appropriate to maximise annual returns.
• Heat pumps and heat electrification is harder and often needs to be combined with building fabric and controls or process optimization to make sense – these can be a super proposition when looking at asset replacement.
• Process electrification varies enormously by sector but can have wider strategic benefits.
• Fleet electrification depends on duty cycles. An increasing share of savings is often hidden in optimization; software and AI measures can support – but not implement, without expert human input – building and process scheduling and route optimisation.

These rankings are directional. Which lever leads depends on the sector, the site and where the asset sits in its replacement cycle, which is what the costing establishes rather than assumes.

There are diminishing returns, because the first measures at a site are the cheapest ones, so a credible plan clusters levers into combined projects rather than cherry-picking. And clustering changes the funding picture, because some combinations unlock grants and concessional finance that single measures do not.

Access to funding is a fair test of an advisor - across our client base we have unlocked EUR 5.5 billion of funding to date.

The questions to ask anyone doing this work

Advisors who shout loudest about a topic usually have something to sell. We do too, agile implementation, which typically starts with rapid costing. So rather than take any advisor's claims at face value, including ours, ask the questions that expose whether delivery is real.

• Are they tied to particular technologies or suppliers, or do they run an open, pre-vetted supplier network?
• Do the implementers carry risk if the measures underperform, and is any of their fee linked to results?
• What is their average client retention (ours is eight years, which is the number we would rather be judged on than any brochure)?
• Do they build capability at the first sites so the company can roll measures out itself, without paying advisors at every site forever?
• And does the company have to fund everything upfront, or can it pay monthly and partly on performance, whether that performance is financial, carbon or time?

None of these questions are unreasonable. An advisor who cannot answer them plainly is describing a report, not a delivery model. The other half of the answer is evidence. Measures are metered and verified after installation, so the saving that reaches the CFO is a measured one rather than a modelled one, and it survives contact with a buyer at exit.

It works earlier too, costing in diligence

The same lens applies before the deal, not just during the hold. In diligence, a rapid costed view tests whether a target's climate targets are backed by a deliverable plan or are ambition without a costing behind it.

We have done this many times, and deal teams tend to find it easier to release budget at that stage than mid-hold. It also accelerates delivery after completion, because the shortlist already exists on day one.

The levers are not limited to decarbonisation either, other sustainability measures carry strong returns, though where the metrics are softer, as with broader regenerative strategy, deal teams find them harder to profile capital against, however large the eventual value.

A real example, deliberately unflattering

BIP.Verco recently supported a fast-growing, services-based portfolio company owned by a leading European private equity firm.

Services businesses are close to the worst case for this work, leased offices, low energy intensity, Scope 3 at an estimated 99% of footprint, and a company already lean after cutting Scope 1 and 2 emissions by 63%. There was, on paper, very little left to go at.

The costed assessment still found it. Business travel and real estate measures capable of delivering £207,500 of annual operating savings against approximately £104,500 of capital expenditure, with an average payback of six months. The costed evidence then supported a two-KPI ESG margin ratchet on a sustainability-linked loan, worth a 10 basis point reduction in the cost of debt when the agreed performance is achieved. If that is what the leanest case yields, the reader can judge what an industrial portfolio might hold.

Fast, but not casual

The speed comes from tooling. Our product team worked with Imperial College London to build an application that lets us assess at pace. The judgement comes from people, the data and context are cleaned and understood by practitioners before anything goes into the tool, which is where decades of delivery experience matter.

Rapid costing is not ready for CFO sign-off; selected projects still need proportionate feasibility work, firm quotes, procurement and verification. But the rapid numbers should not be far from the final ones, and that is the test of whether the work was any good.

The value sits in the decisions made earlier, dropping weak projects, accelerating strong ones, and leaving enough of the hold to deliver, evidence and bank the result before exit.

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