At a glance
- The figure sits in XPS's annual investment fund ESG rating review.
- Alex Quant, head of ESG research at XPS, said physical risk is increasing and private holdings are typically held for long periods.
- For allocators committing capital to closed-end funds, the diligence question becomes whether a manager can map its underlying holdings by physical location and sector against a climate scenario.
56% of private market managers do not run climate stress tests on their portfolios, according to research from investment consultant XPS Group first reported by Net Zero Investor. The figure sits in XPS's annual investment fund ESG rating review.
The 2026 edition assessed 146 funds across 40 managers. Alex Quant, head of ESG research at XPS, said physical risk is increasing and private holdings are typically held for long periods. "The lack of climate stress testing is worrying, particularly for private markets where holdings are typically long-term," he said. "There's a risk many investors do not have a good understanding of how their portfolios will behave in a world of more frequent climate shocks and a disruptive economic transition."
For allocators committing capital to closed-end funds, the diligence question becomes whether a manager can map its underlying holdings by physical location and sector against a climate scenario. Managers often cite information constraints, and privately owned companies disclose less than listed peers, Net Zero Investor notes.
The UK's Pension Protection Fund assessed physical risk exposure across its listed assets for the first time, according to Claire Curtin, head of ESG and sustainability at the fund. The conversation is moving into private markets, she said.
Net Zero Investor describes El Niño 2026 as unusually intense. Asked whether it played a part in the PPF's thinking, Curtin said: "It's definitely on our radar." She added that she has held conversations with the internal portfolio managers who oversee the PPF's emerging-market debt allocation to work out how to monitor or scenario-test those exposures.
Demand for that work is rising as large investors add private assets. Net Zero Investor cites Singapore's GIC, CalPERS and the UK's Mansion House Accord signatories as allocators expanding into private markets. CalPERS' climate-focused portfolio reached $71 billion of a $100 billion goal, as Private Wealth Daily reported this week.
Quant's position is that the constraint is practice rather than data access: climate scenarios are readily available, and a manager holding location-level detail on its companies has what a stress test needs.
The lack of climate stress testing is worrying, particularly for private markets where holdings are typically long-term.Alex Quant, head of ESG research at XPS Group
Reported by the Who's investing desk from Net Zero Investor. Published . Corrections