(Bloomberg) -- Stafford Capital Partners is launching a new private equity program to meet demand from institutional investors seeking more tailored climate strategies.

The UK-based private markets and advisory group, which looks after $7.9 billion in client funds, will start offering customized investment accounts, also known as separately managed accounts, to clients seeking to decarbonize their existing portfolios and invest in the net zero transition. 

The offering comes as Stafford, which is a member of the Net Zero Asset Managers Initiative, says it will no longer take on clients that don’t have net zero targets. Part of the exercise entails bringing more transparency to private markets. That’s amid growing evidence that efforts to decarbonize the economy through stricter regulations are resulting in a shift of high-carbon assets to private portfolios where they’re more difficult to monitor. 

Stafford is focusing its business “on helping those institutions that are looking to work along a net zero pathway and a decarbonizing pathway,” said Angus Whiteley, chief executive of the London-based private equity manager.

The goal is to help institutional clients “achieve a financial return to satisfy their fiduciary obligations and responsibilities,” Whiteley said. “But at the same time, they’re trying to meet the other sort of broader objectives that they have, that frankly we’re all trying to work toward in this world right now.”

Assets under management in private markets reached $16.3 trillion last year, up more than 60% since 2019, according to data compiled by Preqin, an analytics company that tracks the alternative-investment industry. It expects the market to reach more than $24 trillion in 2028.

The pace of growth has led to calls for greater transparency in private markets, with the International Monetary Fund warning this month that “a more intrusive supervisory and regulatory approach” is needed. Meanwhile, institutional investors that stocked up on private assets face growing pressure to ensure their portfolios aren’t completely misaligned with net zero goals.

Managers seeking to raise capital will have to address climate risk “regardless of strategy,” according to a November report by the Global Private Capital Association, whose members managed $2 trillion. 

Whiteley said managed accounts are an effective way to help institutional investors meet their targets. 

Such accounts “take away a blind-pool element, which is important in delivering back to the institutions what they need,” he said. “As institutions become larger and more sophisticated, we see more demand for investor-specific requirements that are best met with the tailored, customized approach of a SMA.”

Until recently, the use of SMAs, which have been around since the 1970s, has been limited. In contrast to conventional funds, sometimes called “blank check” investment vehicles, SMAs offer investors the kind of insight and control they now demand, albeit it at a higher cost.

Assets under management in SMAs jumped to $409 billion in the third quarter, up 16% from 2022 and roughly four times the level of a decade ago, according to Preqin. Firms offering the accounts include BlackRock Inc., OakStreet Financial and Franklin Templeton.

In the private markets, “there are real challenges” around decarbonization, Whiteley said. “We see that in many cases where there are institutions that haven’t really worked out how to do that.”

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