TCFD / Strategy
Strategy
Climate change is reshaping the markets in which our portfolio companies operate. Physical impacts are already affecting operations, supply chains and customer behaviour, while the transition to a lower-carbon economy is changing energy costs, regulation, technology and the expectations of customers, investors and wider stakeholders. For a European-focused private equity firm investing in mid-market businesses with international operations and supply chains, understanding these dynamics is both a matter of risk management and a source of insight that can support stronger, more resilient companies at exit.
This section sets out how Oakley assesses climate-related risks, the principal risks identified through that assessment, how we consider climate-related opportunities, and how we work with portfolio companies on decarbonisation. It concludes by considering what these findings mean for the resilience of Oakley’s investment strategy and operating model.
Portfolio climate risk assessment
Oakley enhanced its 2025 climate risk assessment and scenario analysis by using an external climate risk analytics platform to support a more consistent, portfolio-wide view of physical and transition risks across relevant time horizons.
The assessment covers physical and transition risks across each portfolio company’s direct operations and operating locations and, where data is available and relevant, key supply chain and sourcing locations. It incorporates a consistent set of inputs, including sector, site geolocation, and relevant asset characteristics such as building type, ownership or lease model and, where available, asset value. These inputs are analysed against forward-looking climate projections and hazard intensity metrics to provide a structured view of exposure across the portfolio.
As part of the physical risk assessment, the platform evaluated exposure across a broad range of acute and chronic hazards:
Acute:
River flooding
Rain flooding
Cold waves
Drought
Cyclones
Storm surge
Wildfire
Landslide
Earthquake [1]
Chronic:
Extreme heat
Coastal flooding
Water stress
Heat stress
Soil erosion
Subsidence
Changing air temperature
Changing precipitation patterns
[1] While earthquakes are primarily geophysical events rather than climate-related, we have included this within broader acute physical risk assessments used to evaluate the resilience of physical assets and operations.
Transition risks were assessed across the following five areas:
Market risk
Changes in demand, pricing and input costs under different transition pathways.
Policy risk
Current and emerging climate-related policies and regulatory developments by sector and geography.
Technology risk
Potential for low-carbon technologies and substitution trends to disrupt products, services or operating models.
Legal risk
Evolving legal and compliance landscape, including exposure to climate-related legal action by sector and jurisdiction.
Reputational risk
Changing stakeholder expectations and potential impacts on trust, customer relationships and access to capital.
Scenario analysis
To explore how climate-related risks may evolve over time, portfolio exposure is assessed under a range of widely recognised climate scenarios and modelling inputs, including Network for Greening the Financial System (NGFS)-aligned pathways for transition risk, International Panel on Climate Change (IPCC) Shared Socioeconomic Pathways for physical risk, and selected International Energy Agency (IEA) inputs to inform elements of the transition analysis.
Transition risk scenarios[2]
Net Zero 2050 – Orderly
Earlier and progressively stronger climate policy action and technology change consistent with limiting warming to around 1.5°C by 2100. Transition risks may be more pronounced earlier due to faster shifts in policy, markets and technology.
Below 2°C – Orderly
A coordinated transition consistent with limiting warming to around 2°C by 2100, with policy action that strengthens over time. Transition risks are typically more moderate than in the most accelerated pathways.
Delayed transition – Disorderly
Limited emissions reductions in the near term, followed by a sharper policy and technology adjustment from around 2030, resulting in higher transition disruption as action becomes more abrupt.
Nationally Determine Contributions (NDCs) – Higher warming / insufficient ambition
Reflects outcomes broadly consistent with current NDCs, which are widely viewed as insufficient on their own to limit warming to well below 2°C. This pathway is associated with higher physical risk over time relative to orderly transition scenarios.
[2] The NGFS Current Policies scenario is used as the baseline for transition risk impacts.
Physical risk scenarios
Low carbon world – Lower warming
Stronger mitigation efforts, generally resulting in lower physical hazard intensity relative to higher-warming pathways.
Disorderly transition – Disorderly
A less smooth transition pathway, with warming and physical impacts typically higher than orderly pathways, while still reflecting some mitigation effort.
Hothouse world – Higher warming
Insufficient global mitigation, leading to more severe physical climate impacts over time.
Time horizons
Short term – 2030: Aligns with Oakley’s typical holding period and key near-term climate milestones.
Medium term – 2035: Provides a view of how risks may evolve over the medium term as transition and physical impacts continue to develop.
Long term – 2050: Provides a longer-term sector view of how climate-related risks may evolve, helping inform strategic planning and the assessment of new investments.
Results are interpreted in light of the inherent uncertainty in long-term climate projections and the availability and quality of underlying company data.
Portfolio overview: Climate risk assessment findings
Our climate risk assessment and scenario analysis provides a structured view of portfolio exposure to physical and transition risks across multiple scenarios and time horizons. Overall, portfolio-level exposure is assessed as low to moderate in the short to medium term across the scenarios considered, reflecting the characteristics of Oakley’s portfolio and its sector and geographic footprint. Transition risk is most consistently concentrated in reputational and legal categories, driven by evolving stakeholder expectations and disclosure requirements, while market risk becomes more prominent under faster or more abrupt transition pathways. Physical risk emerges more materially over longer time horizons, particularly under higher-warming pathways, and is concentrated in specific hazards, geographies and assets rather than distributed evenly across the portfolio.
Sector-level analysis
The heat maps below summarise climate-related risk signals at the sector level across scenarios and time horizons. Risk ratings are relative to Oakley’s portfolio context and should not be interpreted as absolute measures of exposure. These results are complemented by portfolio company and asset-level review where appropriate.
Technology
The Technology portfolio is predominantly composed of software, data and digital service providers, which generally results in lower direct transition risk exposure and lower vulnerability to some physical hazards. However, infrastructure-reliant businesses including hosting, cloud and data protection providers can face higher exposure to energy-related transition pressures and location-specific physical risks.
Low carbon world | Disorderly transition | Hothouse world | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | ||||
Overall | ||||||||||||
Subsidence | ||||||||||||
Water stress | ||||||||||||
Extreme heat | ||||||||||||
All other physical risk types | ||||||||||||
Assets at high / extreme risk | 15 | 16 | 16 | 15 | 15 | 7 | 14 | 14 | 49 | 82 | 108 | 68 |
Net Zero 2050 | Below 2C | Delayed transition | NDCs | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | |
Overall | ||||||||||||
Market | ||||||||||||
Policy | ||||||||||||
Legal | ||||||||||||
Reputation | ||||||||||||
Technology | ||||||||||||
Key | |||||
|---|---|---|---|---|---|
Not available | Very low | Low | Medium | High | Very high |
Physical risk
- Physical risk is assessed as moderate on average across scenarios and time horizons, driven primarily by water stress and subsidence.
- In certain geographies, water stress and drought may affect operational continuity, including cooling requirements and infrastructure resilience, while subsidence can affect asset resilience and insurance considerations over time across the sector.
- Sector-level averages may not fully reflect asset-level variability where location-specific site exposures, such as coastal hazards and inland flooding, can be elevated.
Transition risk
- Transition risk is generally low in the near term, reflecting the asset-light and service-oriented nature of many business models.
- Risk increases over the medium to long term under Net Zero 2050 and Delayed Transition, driven mainly by market, legal and reputational factors rather than direct decarbonisation pressure.
- Market risk is primarily linked to rising input costs, including energy and hardware-related raw materials, while legal and reputational risk reinforces the importance of robust governance and credible climate-related claims.
Consumer
Oakley’s consumer portfolio comprises a mix of brand-driven, product-oriented and digitally enabled businesses. While some businesses have their own manufacturing operations, these are limited in scale, and exposure is primarily driven by physical supply chains, raw materials, global sourcing and external production partners. These operating models rely on physical supply chains, raw materials and global sourcing, making customer expectation, product transparency and brand reputation particularly relevant.
Low carbon world | Disorderly transition | Hothouse world | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | ||||
Overall | ||||||||||||
Subsidence | ||||||||||||
Water stress | ||||||||||||
Extreme heat | ||||||||||||
All other physical risk types | ||||||||||||
Assets at high / extreme risk | 40 | 41 | 43 | 5 | 5 | 9 | 93 | 101 | 146 | |||
Net Zero 2050 | Below 2C | Delayed transition | NDCs | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | |
Overall | ||||||||||||
Market | ||||||||||||
Policy | ||||||||||||
Legal | ||||||||||||
Reputation | ||||||||||||
Technology | ||||||||||||
Key | |||||
|---|---|---|---|---|---|
Not available | Very low | Low | Medium | High | Very high |
Physical risks
- Physical risk is driven primarily by supply chain and sourcing dependencies, with exposure concentrated in key manufacturing and sourcing geographies.
- The most material hazard clusters relate to water stress and heat, which can affect operational continuity and productivity, while coastal hazards relevant for specific locations may disrupt production and logistics.
- Subsidence is a chronic risk factor in parts of the operational footprint and can affect asset condition and insurability over time.
Transition risks
- Transition risk is moderate overall, driven primarily by reputational and legal factors linked to brand exposure, customer expectations and tightening disclosure requirements around product claims and materials, which become more pronounced over time.
- Market risk can increase under more ambitious or delayed transition pathways, driven mainly by input cost pressures, including materials, energy and logistics, while policy and technology risks remain relatively low.
Education
Oakley’s education portfolio comprises higher education providers, K12 schools and nurseries. Risk exposure is driven primarily by owned and leased campus infrastructure, high stakeholder visibility and regulatory oversight.
Low carbon world | Disorderly transition | Hothouse world | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | ||||
Overall | ||||||||||||
Subsidence | ||||||||||||
Water stress | ||||||||||||
Extreme heat | ||||||||||||
All other physical risk types | ||||||||||||
Assets at high / extreme risk | 7 | 7 | 7 | 0 | 0 | 0 | 6 | 6 | 26 | |||
Net Zero 2050 | Below 2C | Delayed transition | NDCs | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | |
Overall | ||||||||||||
Market | ||||||||||||
Policy | ||||||||||||
Legal | ||||||||||||
Reputation | ||||||||||||
Technology | ||||||||||||
Key | |||||
|---|---|---|---|---|---|
Not available | Very low | Low | Medium | High | Very high |
Physical risks
- Physical risk is driven primarily by owned and leased campus assets, with location-specific exposure that varies by geography; key chronic drivers are water stress and subsidence.
- Water stress can affect building operations, including cooling requirements and operating costs, while subsidence can affect building integrity, maintenance needs and insurability over time.
- Acute hazards can create localised tail risks for specific sites and risk is most elevated under higher-warming pathways.
Transition risks
- Transition risk is assessed as moderate overall, driven primarily by legal and reputational factors given the sector’s public-facing nature and close engagement with students, parents and regulators.
- Market risk is generally limited, given the essential nature of education services, but can increase under more ambitious or delayed transition pathways due to cost pressures, including energy and building operations, while policy and technology risks remain low.
Business services
Oakley’s business services portfolio comprises a diverse set of asset-light, sector-driven businesses as well as more operationally intensive models. Overall risk exposure is shaped by client relationships, regulatory expectations and selective exposure to physical office and site locations.
Low carbon world | Disorderly transition | Hothouse world | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | ||||
Overall | ||||||||||||
Subsidence | ||||||||||||
Water stress | ||||||||||||
Cold waves | ||||||||||||
Storm surge | ||||||||||||
All other physical risk types | ||||||||||||
Assets at high / extreme risk | 7 | 7 | 8 | 0 | 0 | 0 | 6 | 6 | 24 | |||
Net Zero 2050 | Below 2C | Delayed transition | NDCs | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | 2030 | 2035 | 2050 | |
Overall | ||||||||||||
Market | ||||||||||||
Policy | ||||||||||||
Legal | ||||||||||||
Reputation | ||||||||||||
Technology | ||||||||||||
Key | |||||
|---|---|---|---|---|---|
Not available | Very low | Low | Medium | High | Very high |
Physical risks
- Physical risk is assessed as moderate overall, driven by chronic exposures, particularly water stress, drought and subsidence, which can impact building systems, broader infrastructure dependencies, and asset condition.
- Location-specific acute events, including coastal flooding and storm surge, can create tail risks for exposed sites, with potential to cause asset damage and short- to medium-term business interruption.
Transition risks
- Transition risk is driven primarily by stakeholder expectations, client requirements and regulatory scrutiny, with reputational and legal factors the most consistently elevated over time.
- Market risk can increase under more ambitious or delayed transition scenarios over longer horizons, driven mainly by input cost pressures, while policy and technology risks remain low.
Portfolio climate-related opportunities
The transition to a lower-carbon economy also creates opportunities for our portfolio companies. Oakley’s Sustainability Team engages with management teams to identify and discuss climate-related opportunities where material. These opportunities are assessed qualitatively at company level, recognising that the most meaningful opportunities are typically bespoke to a business’s products, customer base and operating model. Common themes across the portfolio include:
- Operational efficiency and cost resilience – energy efficiency, renewable energy procurement and resource management initiatives that reduce exposure to energy price volatility while lowering emissions.
- Commercial differentiation and customer retention – documented emissions measurement and decarbonisation strategies are increasingly relevant in customer procurement processes, particularly for businesses serving large corporate clients.
Where relevant, these discussions help inform portfolio company sustainability priorities and identify practical initiatives that may support both emissions reduction and business resilience.
Portfolio decarbonisation engagement
Oakley has been a member of Initiative Climat International (iCI) since 2021 and sits on its Net Zero and Regulatory Working Groups. Our approach to portfolio decarbonisation is informed by the iCI Private Markets Decarbonisation Roadmap (PMDR), which provides a structured framework for private equity firms to support portfolio company decarbonisation in a way that is proportionate to influence, materiality and the realities of the asset class.
Within that framework, we work collaboratively with management teams to develop and implement decarbonisation measures where there is a clear commercial or strategic rationale. This approach recognises that durable progress comes from practical initiatives that are aligned with each company’s business priorities. Given energy market uncertainty and the trajectory of regulation and customer expectations, we expect the commercial case for decarbonisation to strengthen over our holding periods.
In practice, Oakley’s support is tailored to each company’s starting point and level of maturity. While portfolio companies may enter the decarbonisation journey at different stages, our work typically follows the following sequence:
1.
Establish a robust emissions baseline
Support Scope 1 and 2 measurements, with Scope 3 coverage and methodologies developed progressively as data and supplier engagement mature.
2.
Identify hotspots and opportunities
Conduct detailed review of emissions profiles and engage operational teams to support analysis and prioritisation.
3.
Develop a decarbonisation pathway
Where there is a clear commercial or strategic rationale, work with management to model emissions trajectories and assess reduction initiatives aligned with growth plans and business priorities.
4.
Support implementation
Provide ongoing engagement, cohort-based knowledge sharing and access to external expertise where required.
5.
Track progress
Monitor progress through annual data collection and continued engagement with management teams.
Oakley prioritises decarbonisation pathway development where there is a clear commercial or strategic rationale; for example, where customers have made emissions reduction relevant to procurement or contract renewal, where regulation requires action, or where the energy intensity of the business model creates a clear efficiency case. In 2025, Oakley agreed decarbonisation pathways with portfolio companies where this case was clearest, supported by in-house tools developed by the Sustainability Team to model emissions trajectories, assess the impact of reduction initiatives and reflect the relationship with growth plans.
Two portfolio companies – ProductLife Group (PLG) and Contabo – have set near-term emissions reduction targets validated by the Science Based Targets initiative (SBTi). In both cases, target-setting was driven by a combination of customer expectations and internal strategic priority. At PLG, the Oakley Sustainability Team provided direct support to management on data quality, methodology and pathway development, as described in the PLG spotlight earlier in this report. We continue to work with additional portfolio companies where similar commercial or strategic drivers are emerging.
Portfolio emissions data quality has continued to improve year-on-year. We will continue to expand both coverage and the share of activity-based data over time, and to develop our approach to portfolio decarbonisation as data, methodologies and the broader regulatory environment evolve. Detailed data coverage statistics are set out in the Metrics and Targets section.
Resilience of Oakley’s investment strategy
Our climate risk assessment indicates that Oakley’s portfolio has a low to moderate overall exposure profile in the short to medium term across the scenarios considered. Exposure is concentrated in identifiable risk types, geographies and assets rather than distributed evenly across the portfolio.
Based on these findings, we believe Oakley’s investment strategy and operating model are well placed to remain resilient under a range of climate transition pathways for several reasons:
Sector focus
Oakley’s focus on technology, consumer, education and business services means the portfolio is structurally less exposed to high-emission, energy-intensive activities.
Geographic profile
Oakley’s European concentration limits exposure to the highest physical-risk regions, while supporting earlier alignment with climate-related regulatory frameworks.
Active ownership
Oakley’s partnership-led approach supports earlier identification of climate-related risks and opportunities and practical engagement with portfolio companies.
Targeted engagement
The portfolio’s concentrated exposure profile allows climate-related engagement and capital allocation to be focused where it is most material.
Over the past 18 months, Oakley has begun trialling approaches to estimate the potential financial impact of identified physical and transition risks across the portfolio. Results to date remain directional but suggest limited material financial impact in the short to medium term, consistent with the low-to-moderate exposure profile described above. We treat these outputs as indicative rather than definitive, particularly for transition risk, where rapidly evolving policy and geopolitical drivers, including their effect on energy prices, limit the precision with which financial impacts can currently be modelled.
We recognise that climate data, methodologies and the regulatory landscape continue to evolve, and that our assessment of resilience will continue to be refined as understanding improves. Oakley remains committed to strengthening its approach over time, including continuing to develop its work on portfolio decarbonisation, scenario analysis and disclosure.
TCFD / Strategy continued
Climate risk in Oakley’s
own operations
Operational climate-related risks
Oakley’s direct operations are not considered materially exposed to physical climate risks. The firm operates from six office locations across Europe and Bermuda, and its business model relies primarily on professional services rather than physical assets or operations with material climate sensitivity.
For Oakley’s own operations, the key transition risk drivers relate primarily to legal, regulatory and reputational factors rather than direct decarbonisation pressure. As an FCA-regulated asset manager with funds domiciled in Luxembourg and Bermuda, Oakley is exposed to evolving sustainability requirements in the UK and EU regulatory environments, including disclosure, conduct and product-labelling rules. These considerations inform Oakley’s approach to climate-related disclosure, governance and external communications.
Operational emissions management
While the most material climate-related impacts for Oakley arise through its investment portfolio, we recognise the importance of measuring and managing our own operational footprint. Oakley has measured its operational carbon footprint annually since 2019 and, in 2024, developed its first internal climate strategy to provide a more structured approach to reducing operational emissions over time. Detailed emissions data, methodology and year-on-year drivers are set out in the Metrics and Targets section.