Claire Curtin, Head of Sustainability and ESG at the UK’s Pension Protection Fund, shares her experience of tracking the transition pathways of private markets portfolios.
Much has changed since 1989’s ‘Barbarians at the Gate’ announced the arrival of private equity as a powerful new force in the financial markets. Since the leveraged buyout of RJR Nabisco, the private markets sector has grown to encompass a wider range of assets – covering credit, infrastructure, real estate, and venture capital, as well as the many hues of equity.
It has also attracted more institutional capital. According to the Thinking Ahead Institute, ‘alternatives’ collectively account for 20% of the investments of the world’s top 20 asset owners. Although the industry’s focus on value creation is unswerving, its understanding of the drivers of that value has also broadened, with ESG factors increasingly viewed as integral to a successful exit strategy.
Last year, the UN Principles of Responsible Investment launched guidance – with the backing of firms including Apollo Global Management, CVC Capital, EQT, Permira and KKR (the original ‘barbarians’) – on using sustainability to drive financial outcomes.
This month, British Columbia Investment Management, one Canada’s largest institutional investors, published a study that draws on its own experience to demonstrate how ESG factors can drive measurable value in private equity.
To deliver returns and impact, asset managers and owners are exercising greater oversight of companies in private markets portfolios. While there are parallels with public markets stewardship, the tone shifts when acting as general partners (GPs) and liquidity partners (LPs).
The level of influence granted by larger ownership stakes is a key factor, alongside time horizons, but the terminology also reflects practical and philosophical differences. The emphasis is often on embedding sustainability at every stage of the value creation process, from entry to exit, reflecting that many firms or assets in a private markets portfolio are in a growth stage – versus the maturity of issuers on the listed markets.
“We see a lot more evidence around value creation now within private equity in particular, and an understanding that improving certain approaches, putting policies in place, and upskilling within a portfolio company really pays off when you’re then looking at exit values,” says Claire Curtin, Head of Sustainability and ESG, at the UK’s Pension Protection Fund (PPF).
While private markets investments cover a wide range of ownership structures, generally a fund’s GP will have either board representation or be in a position of influence or control over management decisions. This can allow LPs more scope to exercise active ownership, whether on sustainability or other issues. Just as in the public markets, reporting and engagement are critical pillars.
“If smaller companies don’t necessarily have the systems management in place, or if an issue does arise, we would expect some kind of resolution from our GP and targeted improvement,” she explains.
“Sometimes it’s a matter of talking about it in a different language, almost less ESG, and more value creation, in terms of how we’re asking for that information. But that’s where we see the opportunity in private markets: you’re getting that effort and that outcome on the ground pretty quickly.”
‘Transition-ready’ assets
Established by the UK government to protect members of defined benefit pension schemes in the event of sponsor failure, PPF manages assets worth around £31.2 billion (US$41.9 billion). Levies from eligible schemes form part of the PPF’s funding model, with investment returns also helping to compensate for losses, protecting around 8.8 million scheme members.
Sustainability has always been central to the fund’s approach. “Operating in a sustainable way provides value for all our stakeholders – protecting our assets and our members’ futures, and benefiting both the pensions industry and the world around us,” wrote Chair Kate Jones in the PPF’s latest sustainability report, published in Q4 2025.
Private markets has also played a key role, representing almost half of the assets in the fund’s growth portfolio (charged with meeting future claims), across private equity (12%), private credit (10%), infrastructure (9%), real estate (12%), and farmland and forestry (6%).
This prominence explains why Curtin spent much of last year assessing climate transition risks across PPF’s private markets investments. The overall aim was to provide a ‘bottom-up’, asset-by-asset assessment of how ready its holdings are for a net zero global economy.
By identifying ‘transition-ready’ assets even within high-impact sectors, the exercise will allow PPF to support real-world decarbonisation while managing the financial risks associated with the energy transition.
Curtin and her team did this in two ways: by developing a bespoke transition and sustainable asset framework to assess risks across private markets sub-sectors; and by asking the fund’s private markets managers to explain and outline their climate transition strategies and analyses.
“Because of our large exposure to private markets and accepting its illiquid nature, it felt like the more pertinent area to start, because that’s going to determine realistically where we can and can’t transition,” said Curtin.
Regarding the framework, PPF started by analysing infrastructure assets, partly as its portfolio included many long-term holdings relating to the renewable energy transition. To categorise assets as already sustainable or transitioning, it leveraged existing taxonomies and frameworks, as well as similar efforts by asset owners and investor networks.
PPF used a traffic lights-based system that revealed varying levels of maturity across private markets sub-sectors, with real estate showing high alignment – 81% of assets are categorised as green (sustainable) or orange (transitioning) opportunities. Three quarters of PPF’s infrastructure book was identified as either sustainable (30%) or transitioning (45%) with just 14% of assets lacking clear targets and/or plans to transition to decarbonise.
But private equity flashed red, meaning PPF was still holding a significant share of legacy high-impact assets with no clear targets or transition plans (27%). Private credit performed even worse with 19% of the portfolio marked red.
Measuring the managers
Alongside its own asset-based analysis, PPF surveyed external managers on their firm-level transition strategy, as well as their assessment of climate transition and physical risks, with a focus on the toughest transition challenges.
While PPF did not always agree with its managers on which assets were already sustainable or capable of transition, Curtin says the fund benefited from different perspectives of managers, as well as their depth of understanding of their holdings.
“Toll roads is an ambiguous area where we were probably wanting to be a little bit more conservative. But our managers really know these assets inside out. So getting a bit more information about how they’re measuring any decarbonisation efforts – quite often they would have board seats in those assets – really helped,” she says.
Toll roads present an example of a common issue across asset classes, says Curtin, with holdings being assessed for Scope 1 and 2 emissions, but not the Scope 3 emissions further along their value chain. As such, managers might assess firms as being aligned with a net zero pathway through their own operations, while PPF might point out that they are currently enabling emissions by vehicles powered by internal combustion.
Curtin points to initiatives by other infrastructure holdings that demonstrate the role they can play in reducing Scope 3 emissions. “With some of our port investments, we’re starting to see amazing technological advancements in how they’re thinking about berthing that can really reduce emissions,” she says. “But we still want to think longer term about Scope 3, and where those activities are going in that 10-year timeframe.”
Survey responses showed that around almost all (96%) infrastructure managers and four in five (82%) of real estate managers had firm-level transition plans or strategies in place, compared to around half of private equity and credit managers. These real assets managers had also conducted physical risk assessments for a very high proportion of PPF’s holdings (95%), with a slightly lower proportion (83%) covered by transition risk analyses.
Lower levels of performance elsewhere meant that 66% of PPF’s private markets managers overall had transition plans, while 51% of PPF mandates had relevant plans in place. At the asset level, 28% of individual PPF assets currently have credible transition plans.
Curtin believes the exercise – and similar activity from peers – will prompt managers to step up their activity.
“Hopefully by increased questions from asset owners like ourselves, they [managers] can see that we’re really starting to take an interest. We’re trying to understand which managers we have the most influence with, which generally means which ones we’re going to be allocating the next vintage to,” says Curtin.
Curtin is clear that the PPF is not about to exclude managers that do not deliver a formal transition plan. But, in common with other asset owners, the fund is looking for evidence of both top-down and bottom-up consideration of climate risks, including annual updates to the data provided in response to its questionnaire.
“Even just one or two managers per strategy can really shift our overall exposure,” she says.
Credit’s new covenants
Private credit presents some idiosyncratic challenges, according to Curtin, due to the nature of lending agreements and relationships. Periodic renegotiation of lending terms can provide opportunities to revise expectations or set new targets, subject to influence and geography.
Private credit is also “probably a more challenging area to get data from”, she says, partly due to the length of investment in certain “legacy assets”.
“Some of those covenants were agreed in a time before ESG-type data was expected. Similarly, where we sit as a lender is generally lower in terms of the influence and ability to demand greater data.”
Notwithstanding the broad range of ways for LPs to invest in private credit, Curtin contrasts the level of influence with private equity investors. “If one of our GPs has a board seat, then the influence is much greater, and we would then expect a greater level of reporting and transparency from that manager.”
Increasingly, however, innovation is changing oversight and incentives in the private credit space. This includes the use of ‘ESG ratchets’, clauses in lending agreements that offer better terms – typically lower borrowing rates – if certain targets or objectives are met. To an extent, notes Curtin, this mirrors developments in the broader sustainability-linked debt markets.
“They’re not green bonds, but there is some incentive to the company, if they address certain KPIs. But we tend to see it more in the European markets than we would in North America at the moment,” she explains.
ESG data convergence
Curtin observes that data standards in the private sector have coalesced more quickly than in public markets, helped in part by a lack of legacy standards.
PPF has supported an initiative by its portfolio management system provider to facilitate sustainability-related data flows from GPs. Alongside other institutional investors, PPF has worked with eFront, a division of BlackRock, to increase the number of its private markets managers providing standardised data, with around two thirds of the fund’s providers having committed to providing data.
As such, last year PPF received GP-reported data for approximately 550 portfolio companies across core ESG and carbon metrics, including Scope 1, 2 and 3 emissions, biodiversity impacts, and UN Global Compact violations.
“The uptake has been really pleasing, but the quality and completeness will need to evolve,” said Curtin.
These efforts align with those of the ESG Data Convergence Initiative (EDCI), a global scheme with more than 500 GP and LP participants, which provides standardised ESG metrics for approximately 9.000 portfolio companies.
PPF has seen strong participation from US private markets firms. “Even some of our smaller private equity managers are committing to reporting through the initiative now, which is great to see, and feels like a couple of years earlier than I would have expected,” says Curtin.
EDCI has adapted metrics that are broadly aligned with the principal adverse impact indicators initially introduced under Europe’s Sustainable Finance Disclosure Regulation. Less stringent than mandatory reporting regulations, Curtin argues that the initiative’s approach has struck the right balance between depth of information and implementability.
“As time moves on and technologies improve, data capture with AI tools will help to build around the edges,” she says. “But having a smaller number [of indicators] and more adoption has been a better approach to take, rather than searching for perfection.”
In 2025, PPF also started to introduce PowerBI-driven dashboards that present core ESG and climate metrics relevant to each portfolio, with detailed, company-specific look-throughs available via underlying datasets. Similar dashboards for private markets portfolios will be rolled out in 2026, “maintaining transparency and analytical depth while adapting to the unique data challenges of those asset classes”.
The full picture
In the near term, PPF will not be setting formal targets against the framework, focusing instead on building out the full picture of the transition status of its portfolios. But the fund is already using the framework as part of its due diligence, for example taking a cautious approach to investments with similar characteristics to those in its ‘red’ transition category.
“It’s not that we wouldn’t invest in what we would consider ‘red’ assets,” she explains. “It’s more that we would need to see some strategy being put into the management plan. We need to know that our GP is thinking about how [decarbonisation] would play out.”
The findings of the manager survey will also feed into the firm’s other assessments to encourage higher standards and closer alignment with its objectives, including its quantitative manager scoring framework.
As well as continuing PPF’s work with private markets companies, Curtin expects to deepen the fund’s understanding of transition-related progress among its public markets holdings.
On the one hand, PPF manages more money internally, compared with its private portfolio; on the other, it is dispersed across a much wider public portfolio, including around 3,000 stock holdings. “We can’t take the same approach asset by asset, so we need to be a little smarter about how we assess en masse for those portfolios,” she notes.
And while transition-relevant data is much more readily available for publicly listed stocks, the absence of a common transition taxonomy gives much room for interpretation in assessments. This poses problems for PPF when it comes to aggregating the often-divergent and inconsistent information from managers across the whole portfolio, seeking scalability and simplicity.
PPF is looking to understand, for example, what are their managers’ 10 largest exposures, or the 10 companies they consider least likely to transition, and as well as related engagement plans.
“We’ve been asking for reporting from our public markets managers for five, six years now, but this is a new wave of information that we’re now starting to request from them. A lot of this activity is done in house, from their perspective, so it’s about understanding their philosophy and their methodology at this stage.”
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