Fund managers left out on red tape reduction

Roger Fink, general partner at Pinsent Masons, says the CRC Efficiency Scheme, designed to motivate UK firms to reduce their carbon footprint through the use of penalties and rewards, is not properly distinguishing between the structure of investment funds and other types of company.

The scheme is currently in consultation as part of a Government crackdown on red tape, but Fink believes the changes do not go far enough. "The main problem for investment funds is that ‘groups' as defined by the Government have to register for the scheme as a whole. Due to the way limited partnerships and other investment funds are structured, this means many have to register and face potentially complex administration of the scheme," explains Fink.

Currently, a private equity fund's general partner would have to register for the CRC scheme as a single group, and report its entire portfolio as though it were a single group, despite many underlying businesses being completely unrelated and even operating in different industries.

Fund managers are left out on red tape reduction

Fink, who has represented a number of private equity firms during the CRC Efficiency Scheme's latest consultation, says the ideal solution for funds would be for the Government to exempt them from the regulations, meaning portfolio companies could deal with the administration of the scheme independently.

"The point has been made several times during the consultation that an exemption for investment funds makes sense, but the Government has not been very sympathetic to the issue. It seems they want to catch as many firms as possible under the scheme in order to meet their obligations to reduce carbon emissions," notes Fink.

However, the latest consultation is expected to bring some reprieve for private equity and venture funds. A key part of the proposals involves making it easier for firms to separate out subsidiaries, meaning funds could register their portfolio companies and then each business could deal with its CRC obligations individually. This would still create additional administration for investment funds, as they would need to complete the necessary paperwork to separate each company they own, but would mean they no longer need to provide combined reports for unrelated portfolio companies.

The Government's consultation is now closed and final legislation is expected to be announced in the coming months to begin from April 2013. Fund managers will be hopeful the changes will help reduce administrative costs while continuing to help businesses limit their carbon footprint.

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• Topics
• Regulation
• UK / Ireland
• Pinsent Masons
• United Kingdom