Underwriting Climate Risk to Drive PE Value Creation
At our recent New York roundtable, leading General Partners (GPs) gathered to address a critical shift: the transition of climate risk from a sustainability target to an active value driver. Risilience CEO Angela Brown outlines how GPs are deploying climate resilience as a core strategy to drive portfolio value creation and protect terminal asset value.
Resilience was the defining theme across New York last month as global decision makers gathered for Climate Week NYC. Yet, while the ambition to integrate climate resilience into core business strategy is stronger than ever, the stark operational and commercial realities have fallen into sharp relief. Against a backdrop of geopolitical instability, macroeconomic headwinds, and severe climate-driven weather events, GPs are being forced to confront the hard pragmatism of protecting portfolio margins and securing volatile supply chains.
This commercial reality was a focal point of our roundtable, where guest speaker Esohe Denise Odaro, Managing Director and Head of Sustainable Finance & Transition (Europe & Americas) at HSBC opened the discussion. Denise spoke to strategies that forward-looking GPs can implement to evidence the value of integrating sustainability across the entire hold period. These include building a playbook and practical systems to turn the conversation around ESG into strategic intelligence, including: materiality; focusing on financial impact; stakeholder engagement; and data-driven, quantitative frameworks.
The Verification Era and the Quantitative Gap
The roundtable also provided a timely opportunity to discuss the findings of our recently published report, Climate and Capital 2026: Unlocking Strategic Value from LP Insights, which surveyed 526 senior Limited Partner (LP) decision makers across North America, Europe, and the UK.
Our research reveals that the conversation between LPs and GPs has fundamentally shifted. What was once a top-down reporting mandate has evolved into a highly sophisticated partnership focused on a single metric: financial value.
While 93% of LPs are actively engaging with their GPs on climate, they are no longer relying on trust or qualitative narratives:
- An overwhelming 80% of LPs now conduct independent verification of GPs’ climate claims during due diligence and active ownership.
- Static, retrospective annual ESG reports are rapidly giving way to demands for real-time transparency through dynamic dashboards.
Despite this heightened scrutiny, a major disconnect remains. Only 42% of LPs believe their GPs effectively quantify climate opportunities, and just 35% believe climate risks are being adequately translated into concrete financial terms. This “critical accountability and information gap” is compounded by fragmented methodologies, leaving many GPs struggling to price these risks into core valuations.
Four Key Takeaways for GPs
Managers at our roundtable agreed that while bridging this quantitative gap is challenging, those who master it will command a significant fundraising and operational advantage. Four key strategic priorities emerged from our discussion:
• Sector-Specific Materiality: One-size-fits-all ESG frameworks do not resonate with deal teams. To be useful, climate risk analysis must be calibrated to incorporate highly specific sector and regional nuances.
• Finding the Blind Spots: Advanced data and analytics must be used to uncover unpriced physical risks, and identify overlooked transition opportunities.
• Making it Concrete: Case studies are critical. GPs need concrete benchmarks and real-world examples to show portfolio companies what “good” looks like and how to emulate it.
• Capitalizing on Sophisticated LPs: Highly active LPs are a resource, not just a hurdle. GPs can leverage their most sustainability-focused investors to push internal capabilities forward, helping them stand out in a crowded fundraising market.
Resilience as a Performance Engine
Right now, physical risk is the urgent priority for GPs. This reflects what we are seeing across the global corporates we partner with: as the frequency and severity of wildfires, floods, and droughts increase, physical climate risk is directly threatening asset values and disruption to business operations.
Ultimately, integrating climate risk into your underwriting is not a box-ticking exercise; it is about driving superior operational performance. GPs who successfully transition from reporting ESG data and metrics to integrating the financial quantification of climate risks and opportunities into their value-creation programs will build more resilient, exit-ready portfolios. By delivering the transparent, quantitative evidence that 80% of LPs surveyed now actively verify, forward-looking managers will not only safeguard their portfolios from downside volatility but will position themselves to win the flight to quality in future capital allocations.
• Join Risilience for an exclusive, off-the-record roundtable of peer PE leaders to navigate the collision of macroeconomic shocks and climate disruption. Read more and register for Climate Alpha: Underwriting Risk & Driving PE Value Through Global Volatility, Tuesday November 17, at 19.00, London.
• Download the Risilience report Climate and Capital 2026: Unlocking Strategic Value from LP Insights.