The PPF also is extending those expectations of good stewardship to the external managers, counterparties and portfolio companies it works with. The fund is pushing for more disclosure from private markets portfolio companies, and Curtin said that the exercise the PPF has gone through itself to report on its own operations and organizational strategy has helped executives understand the challenges these companies face.
The PPF does not split out its actual asset allocation, but it has a 41.5% strategic allocation to return-seeking assets, which includes private equity and other alternatives.
That desire to lead from the front, help to make a difference in the industry and to develop the strategy and its communication carefully and thoughtfully means Curtin's first few years in the role have required a lot of detailed work.
The PPF started work around the alignment metric requirement — the need for disclosure of the extent to which investments are aligned with the Paris Agreement's goal of limiting temperature rises to 1.5 degrees Celsius — before it became mandatory in October 2022.
"It took a lot of (work) in-house with an external consultant to help us," she said. "It was very manual — we sat down with our internal portfolio managers and went through, line by line, 'is this asset renewable or exposed to that?'"
With the work done on asset identification, Curtin and her team now need to overlay the more accurate data as it comes in, "refining the inputs as they become more available. So, although it was very painful, it was really useful."
The PPF has worked on its equity benchmark over recent years, which included removing a few companies overly exposed to activities that were at risk of becoming stranded — largely thermal coal-related — and the carbon footprint reduced by 50%. "That was more of a risk-management exercise," she said.
Outside those risk-related divestments, the PPF has seen the number of companies that were considered not to be aligned at all with the Paris Agreement decreasing, while those moving into the aligning or aligned bucket is increasing.
"It's not that we've actually changed the underlying portfolio construction so much — it's that the companies are starting to set targets and they're starting to operationalize in a lot of these commitments," she said.
Now, Curtin and her team are working on the next stage of the PPF's ESG journey: what happens to the companies that fail to improve.
Oil and gas companies can remain in the benchmark if they're integrating climate into their strategy, "but (with the portfolio alignment metric work) we can show that the commitment at a company strategy level is starting to come through, and we have to give them the benefit of the doubt over the next couple of years. There probably will come a point in two or three years' time where we have to question whether that commitment has actually played out. And if it hasn't, then we will need to look at escalation."
As such, she's drafting a formal escalation policy now. "At the moment, the plan is not to sell out of those names, but to specifically push for better disclosure and then the company setting targets. This escalation policy will say, if by an appropriate amount of time they haven't done this, then we will follow a process of escalation, all the way up to being really public such as submitting a resolution. I think you have to be able to show there are teeth, but you've got to use the teeth wisely," Curtin said.