Bruno Gardner, Head of Climate Change and Nature at Phoenix Group, explains how the asset owner intends to use private markets channels to deliver impact and returns.
For major asset owners in the UK, two key themes dominated 2025: the shift into private markets to support the government’s growth agenda; and the doubling down on sustainability commitments, especially around climate and nature.
In May, 17 major pension providers signed the Mansion House Accord, committing them to investing at least 10% of their default funds into private markets assets by 2030, with at least half allocated to investments in the UK.
This was followed in October by the launch of the Sterling 20, an investor-led initiative aimed – in the words of UK Chancellor Rachel Reeves – at “bringing our savings, our investors and our regions together to deliver the homes, infrastructure and industries that will drive growth and create good jobs in every corner of the country”.
In February, many of the same institutions supported an asset owner statement on climate stewardship, which called on asset managers to “raise the bar”, distilling their expectations into five principles. By October, support for the statement had broadened across geographies, amid lost mandates and a growing emphasis among investors on nature alongside climate action.
These two themes are far from the only items on asset owners’ agenda – concerns persist over AI investment bubbles, and the impacts of geopolitical volatility, especially on trade flows – but 2026 is likely to see them further entwined.
“There is a huge job for institutional investors like Phoenix Group who are ultimately going to be able to invest at real scale and to learn by doing,” says Bruno Gardner, Head of Climate Change and Nature at Phoenix Group, which has £295 billion (US$393 billion) in assets under administration, and is a member of the Sterling 20, and a signatory of both the Mansion House Accord and the asset owner climate stewardship statement.
“We’re doing some really interesting work to better understand how institutional investors can play a greater role alongside banks and other investors to more rapidly scale up the investment we need to see.”
Direct lever
Gardner sees significant potential in private markets channels, both to deliver returns and impact in line with the interests of end-beneficiaries, also recognising these markets as an engine for economic growth in the UK.
Before it signed up to government-backed initiatives to increase UK-based investments via private markets, Phoenix Group had already committed to invest up to £40 billion in sustainable, transition or productive assets, including climate solutions, as part of its net zero by 2050 strategy.
“As a relative value investor, we’re looking for private markets to provide a premium to what might be available in the public markets because we need to take account of the relative lack of liquidity and the greater assessment and understanding required on an investment-by-investment basis,” says Gardner.
“It’s possibly the most direct lever at our disposal to drive the wider transition in the real economy.”
While Phoenix Group has exposure across a range of private markets subsectors, including venture capital, the firm has focused largely on real assets and infrastructure, partly for their track record in delivering stable long-term returns.
From a sustainability impact perspective, these sectors already offer attractive opportunities for climate-positive investments, for example in UK energy infrastructure, combining proven asset classes with technologies that require significant capital.
“When you look at what’s needed to deliver the Clean Power 2030 action plan – upgrading, building out and modernising the transmission and the distribution networks – these assets are in Phoenix Group’s sweet spot,” says Gardner.
Over the next five years, the UK aims to complete the country’s transition to generating electricity from clean energy sources, requiring around £40 billion in annual investment, covering renewable energy generation capacity, long-duration storage, grid modernisation and supply chain and skills development.
Gardner expects Phoenix Group’s use of private markets channels to deliver nature-positive returns and impacts to follow a similar pattern to these climate-focused investments.
This includes seeking out investments in proven asset classes that offer opportunities to generate revenue streams from ecosystem services, such as carbon or biodiversity credits.
“We recognise there’s a huge opportunity to invest in nature-based solutions in a way that can support good customer outcomes whilst also addressing the systemic risks of nature loss. In the first instance, we’re looking for opportunities to invest where there is an asset class that we understand underpinning other revenue streams,” he explains.
Gardner describes nature-positive investments as “emerging opportunities”, but acknowledges that investments in the net zero transition are far from mature either. For both, barriers remain in terms of the external conditions for investment, but also the capacity of Phoenix and its asset manager partners to grasp available opportunities, with private markets representing particular challenges.
Building the pipeline
The UK government has explicitly acknowledged its role in facilitating domestic investment opportunities for signatories of the Mansion House Accord. To date, Phoenix Group has found much more opportunity in areas such as social housing, compared with investments aligned with climate and nature objectives.
“There are opportunities to invest within the current policy and regulatory landscape, but overall, we’re seeing far fewer investable opportunities come down the pipeline than we would like to be the case,” says Gardner.
The asset owner has focused much of its policy and advocacy work in recent years on identifying ways of increasing this investment pipeline. These include calling for a UK-wide transition plan to help overcome barriers to climate solutions, covering not only sector-specific roadmaps but also collaboration between local government and institutional investors, to plan and fund the decarbonisation of the built environment and transport infrastructure.
In 2026, says Gardner, Phoenix Group will be aiming to collaborate constructively with the government to overcome challenges facing climate and nature-positive investments.
“Fundamentally, a lot of it comes down to not seeing risk-adjusted returns which stack up for us in the context of more nascent climate solutions and nature-based investment opportunities. Therefore, the focus of our policy and regulatory advocacy has been on the development of policies that help to de-risk investments, for example through blended finance or insurance or guarantees,” he explains.
In 2025, investors seeking predictable and consistent policy environments to support climate and nature-positive investments have instead faced growing uncertainty, as governments row back on previous commitments, often due to concerns about costs to businesses and consumers.
In recent weeks this has included a loosening of the European timetable for the withdrawing internal combustion-engined vehicles from sale, and exemptions from the UK’s Biodiversity Net Gain (BNG) scheme.
The latter, which requires property developers to improve biodiversity by 10% as part of any new project, was widely welcomed in February 2024 as an innovative way of stimulating the market for biodiversity credits, generated through investments to restore and protect natural environments. The new exemptions, introduced to help meet government housing targets, are seen as risking the growth of this new nature market, by weakening demand for credits from developers.
In addition to the dilution of BNG, Gardner notes warnings from the UK’s Reform Party about the future of the contracts for difference regime used to finance offshore wind generation capacity. “One of the concerns that we have as long-term investors at the moment is a greater feeling of uncertainty,” he says.
From risk to opportunity
In parallel to its policy and advocacy efforts, Phoenix Group has been investing in its own relationships and capabilities to better position itself for climate- and nature-positive allocations.
From a nature perspective, the firm’s increasing upside focus is an evolution from an initial project to capture portfolio risks, impacts and dependencies via the Taskforce on Nature-related Financial Disclosures’ LEAP (locate, evaluate, assess, prepare) assessment framework. The taskforce’s work on nature reporting standards is now being taken on by the International Sustainability Standards Board.
According to Gardner, the exercise provided a “solid foundation” to better understand Phoenix’s existing portfolio exposures, leading to a focus on deforestation and freshwater scarcity as priority themes. The asset owner is ramping up stewardship activity to mitigate these nature-related risks, while attention turns steadily to opportunity.
“A lot of the areas we expect ultimately to develop into well-functioning markets with investable opportunities aren’t there yet. And they tend to suffer from the same challenges as a lot of more nascent climate solutions,” says Gardner.
As the firm develops its views on identifying and addressing barriers to investment, it is working closely with asset management partners to pursue available opportunities.
Gardner expects collaboration in private markets to take different forms than in public markets. A working example is Future Growth Capital, a joint venture with asset manager Schroders.
“One of the drivers is a recognition that in order to invest in private markets, you need a certain scale and expertise, due to the higher transaction costs and a greater need for deal-specific due diligence. That’s hard to do if you’re subscale,” says Gardner.
Established to promote the objectives of the Mansion House Compact, FGC is expected to deploy up to £2.5 billion over three years from Phoenix Group, building on an initial £1 billion commitment. This forms part of a plan to direct £10-20 billion of investor funds into private markets over the next decade, investing in the UK and globally.
A key reason for creating FGC is to provide a dedicated vehicle for other pension funds. “The single biggest benefit from collaboration is enabling smaller players to benefit from that expertise and scale that would otherwise preclude them from investing in private markets,” says Gardner.
Integrated decision-making
Alongside FCG, Phoenix Group is working with external managers with specific areas of expertise, and developing its own capacity for direct investment. This requires in-house investment in due diligence, including sector-specific expertise.
“It’s really important that we’re conducting very thorough due diligence to fully understand these investment opportunities,” says Gardner, emphasising the need to understand emerging technologies alongside more proven solutions.
“When you’re looking at the next generation of climate solutions like carbon capture, usage and storage or hydrogen production, huge amounts of due diligence are required on a deal-by-deal basis. The same is very much true of nature-related investment, where we’re much earlier on our journey.”
To improve capacity and coordination, Phoenix Group has made structural adjustments over the past 12-18 months which involve sustainable investment experts migrating from the firm’s centre of excellence to the frontline investment teams.
“We’re now in a position to make much more integrated decisions in relation to whether, when and how we’re investing in sustainable asset classes and making direct investments in those,” says Gardner. “It’s been a really important evolution.”
