By Sylvain Forté (SESAMm) and Mariya Peykova (Scientific Climate Ratings)

Picture two infrastructure assets.

The first carries obvious physical exposure, sitting right where the climate is changing fastest. The second is operationally robust and is considered sustainable, but it generates a steady stream of fines, local opposition, and headlines.

Which one is riskier to investors?

The answer depends on which question you're asking.

Viewed through a climate model lens, the first asset appears more exposed. Viewed through real-time controversy monitoring, the second demands more immediate attention. Neither assessment is wrong. Each captures a different dimension of risk.

That's why leading infrastructure investors increasingly rely on multiple perspectives rather than a single measurement. Climate risk doesn't reduce to a single definitive answer. It unfolds across different time horizons, different datasets, and different types of evidence. Looking through multiple lenses provides a richer understanding of an asset's resilience and the risks that may shape its performance throughout the investment lifecycle.

Four complementary lenses help build that picture: physical, transition, controversy, and regulatory.

The first two, physical and transition, are forward-looking. They use models and scenarios to estimate how climate change and the low-carbon transition may affect an asset over years and decades. The other two, controversy and regulatory, are grounded in today's reality, tracking emerging events, stakeholder concerns, enforcement actions, and changing policy as they happen.

Together, these lenses provide a more complete understanding of risk. Physical and transition analysis explain where an asset is heading over the mid and long term. Controversy and regulatory monitoring reveal what is happening today and how quickly new issues are emerging. Rather than competing, they complement one another.

We explored exactly this approach during a recent live session co-led by Sylvain Forté, CEO of SESAMm, and Mariya Peykova, Sales Director at Scientific Climate Ratings, where they put a real infrastructure asset, a coal-fired power plant operated by LEAG, through each of the four lenses. The session demonstrated how decision makers can integrate Scientific Climate Ratings’ and SESAMm’s products to capture climate risk from all angles. Below, we’ve recapped key takeaways from that analysis.

The Long View: Physical and Transition

Start with the lenses that look across the life of the asset: physical and transition. Both are the domain of Scientific Climate Ratings, which translates climate science into financial metrics that investors can act on. Its Climate Exposure Rating runs on a standardized A to G scale (A is climate-resilient, G is structurally vulnerable), combines physical and transition components, and is forward-looking offering various time horizons from 2035 to the end of an asset's operational life. Each grade is benchmarked against a stable universe of more than 6,000 private infrastructure assets across 25 countries, and the methodology is deliberately transparent, with no black boxes.

The physical lens asks what a changing climate does to the asset itself. For the Schwarze Pumpe plant, the answer is reassuring. Its headline physical exposure rating is A, the most resilient grade, with asset-equivalent damage of just 0.09%. What little exposure there comes mainly from manageable flood risk, with heat stress limited.

However, the model flags one hazard that needs monitoring: drought. It rates F, with water demand projected to be four times the available supply and drought conditions covering three months of the year, for an asset that, like much heavy industry, depends on water. That signal does not yet include a financial damage figure because a peer-reviewed drought damage function is still being developed, but it is a real exposure that the model is flagging for the future.

The transition lens asks a different question: how does the asset perform as the economy decarbonizes? Here, the same plant tells a starkly different story. Under a net-zero pathway toward 2035, it rates G, the worst grade on the scale. The pressure intensifies sharply from around 2030, driven by Germany's legislated coal phase-out under the KVBG, with projected revenue approaching near-total devaluation. Both sub-components sit at the bottom of the scale: direct carbon costs, as carbon prices climb toward roughly $700 a tonne under net zero, up from today's levels near $76, and market demand, which collapses to the point of total demand destruction. On this trajectory, the asset is, in effect, stranded.

To be fair to LEAG, this is not a company simply waiting to shut down. Backed by the federal government, it is already planning an 850-megawatt hydrogen-ready gas plant at the same site to replace half of the retiring coal capacity. That is a genuine transition story, and exactly the kind of forward plan the modeled lenses are built to weigh.

These grades are not abstract scores. They translate physical and transition exposure into comparable financial metrics, such as annualized expected damage and revenue at risk, projected forward to 2050 and beyond, so one asset can be weighed against thousands of others on the same terms.

Taken together, these long-term perspectives paint a nuanced picture. The Schwarze Pumpe plant is physically resilient today, yet its economic model faces a steep, policy-driven decline within the decade.

What they don't capture is what may already be unfolding around the asset right now.

Scientific Climate Ratings already offers Climate Risk Ratings (CRR), the next step beyond the Climate Exposure Rating (CER) featured here. Where the CER quantifies climate exposure and potential average annualized damage, the CRR translates it directly into impact on key financial metrics: revenues, cash flows, probability of default, and enterprise value. The step from 'how exposed is this asset?' to 'what does this cost?' in the financial language that investment committees can act on. 

The Signal View: Controversy and Regulatory

Now switch to the lenses that focus on the present: controversy and regulatory. 

Both are the domain of SESAMm, which uses AI to detect ESG controversies on private assets, often before they surface in traditional ratings. Drawing on one of the industry's largest data lakes, it reads more than 35 billion documents (news, regulatory filings, local press, NGO, and court reports) and distills them into a Controversy Exposure Score on a 0 to 100 scale. Individual events are aggregated into cases, each with a timeline, its sources, and a severity rating that reflects how material the issue is: financially, legally, and by the number of stakeholders affected.

The controversy lens, then, monitors how the outside world is responding to an asset in real time, surfacing meaningful developments as they emerge.

For LEAG, that real-time read is substantial. The operator carries a high Controversy Exposure Score spanning environmental, social, and legal topics. There is proven legal action against one of its mining operations, flagged at the highest severity as a potential UN Global Compact violation, alongside criminal complaints over environmental breaches and a record of legal, regulatory, and community pressure built up over the years. A notable cluster of those signals concerns water, both consumption and pollution, including challenges and complaints over groundwater pumping and water permits.

That last point is telling. Recall the drought exposure the physical model flagged but could not yet price. Here it is, already materializing as legal and community pressure on the ground, picked up in real time. None of this appears in a physical climate model or a transition scenario, yet each development can influence permitting timelines, financing conditions, operational flexibility, or reputation.

This is where real-time signals become especially valuable. Controversies often emerge long before they are reflected in annual ratings or financial models. Public opposition, regulatory investigations, and stakeholder disputes can develop over months or even years before they result in fines, project delays, or impairments.

Alongside controversy monitoring sits the regulatory lens, which captures how policy is evolving and being enforced on the ground. For infrastructure investors, this may include relicensing requirements, water rights, environmental compliance, or expanded disclosure obligations such as the CSRD. In many ways, the regulatory perspective bridges long-term transition trends with today's operational reality.

These lenses answer a different set of questions from climate models. Rather than forecasting where the asset is heading decades from now, they reveal what requires attention today.

Four Lenses, One Richer Understanding

The Schwarze Pumpe plant is, at the same time, physically resilient, economically stranded on a net-zero path, and under active legal, regulatory, and community pressure today.

Each lens highlights a different aspect of the same asset, operating across different timescales and using different types of information. Physical and transition analysis explain long-term structural resilience and exposure. Controversy and regulatory monitoring reveal how emerging issues are unfolding in real time.

It's tempting to combine these perspectives into a single score, but doing so risks losing the context that makes each valuable. The four lenses aren't multiple measurements of the same phenomenon. They're answers to different questions.

Viewed together, however, they become considerably more powerful. The drought finding captures it: a hazard the physical model can flag but not yet price, becomes far easier to weigh once real-time monitoring shows the water-related legal and community pressure already building around the asset. Long-term climate modeling helps investors understand whether a controversy reflects a temporary challenge or an early signal of structural risk. Conversely, real-time controversy and regulatory monitoring provide context for long-term scenarios by indicating whether projected risks are already beginning to materialize.

No single lens tells the whole story.

Together, they provide a far clearer picture of infrastructure risk.

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[SESAMm and Scientific Climate Ratings operate as independent platforms. This analysis reflects a collaborative session designed to illustrate how complementary approaches to climate risk can be combined to provide a holistic risk assessment across both short-term and signals and long-term risks.]

For decades, private market investors have relied on upfront due diligence as the primary moment to assess ESG, reputational, and operational risk. The logic was straightforward: conduct a thorough review at acquisition, document the risks, and manage the asset from there. That model is now under increasing strain. Not because due diligence is no longer important, but because the environment in which private investments operate has changed fundamentally.

This shift was a central theme of a recent 2026 webinar on private markets featuring Benjamin Krusche, Strategy Director at Clarity AI, and Sylvain Forté, CEO at SESAMm. Both speakers emphasized that one-off ESG due diligence no longer reflects how risk actually emerges over the life of an investment, and why continuous monitoring is becoming essential.

Due Diligence Hasn’t Disappeared - The World Around It Has Changed

Upfront due diligence has always been a cornerstone of private market investing, and it remains essential. What has changed is not the role of diligence itself, but the assumptions that once made a point-in-time assessment sufficient.

Historically, many ESG and reputational risks were relatively static. If an asset appeared clean at entry in terms of governance, compliance, or industry exposure, it often remained so long enough to exit. ESG due diligence, in that context, was largely about establishing a baseline. Today, risk behaves differently.

A recurring theme throughout the webinar was that some of the most material ESG and reputational risks can emerge after acquisition rather than at deal close, especially as holding period durations increase. These risks surface through litigation, regulatory enforcement actions, labor and human rights incidents, or reputational controversies. Signals that rarely align neatly with due diligence checklists.

In private markets, where disclosure remains fragmented, the absence of information at entry does not imply the absence of risk. It simply delays visibility. That said, continuous monitoring is not a complete solution to this opacity. Many private portfolio companies, particularly mid-market industrials, have minimal media footprints and limited public disclosure. Monitoring signals that do not exist produces no insight. Effective coverage, therefore, requires triangulating across multiple data sources, including direct company engagement.

Risk Is No Longer Static - It Is Event-Driven and Fast-Moving

Many of today’s ESG and reputational risks are triggered externally and unfold quickly, often outside management’s direct control. While management-provided information remains important, it is no longer sufficient on its own.

Today, many material risk signals emerge from:

• Media reporting
• Regulatory actions
• NGO investigations
• Court proceedings
• Employee and labor disputes

These signals often appear well before issues are formally disclosed, if they are disclosed at all. As a result, relying solely on point-in-time information captured at acquisition creates blind spots that widen over time.

Longer Holding Periods Increase the Cost of Being Late

Longer holding periods amplify these challenges. Issues that were immaterial (or invisible) at acquisition can surface years later, well beyond the scope of an initial due diligence exercise. When that happens late in the holding period, the consequences can be significant: delayed exits, repricing, or friction during refinancing. But the pressure is also coming from the other direction. Large institutional LPs are increasingly embedding ongoing ESG reporting and monitoring requirements directly into side letters and limited partnership agreements, making continuous visibility not just prudent risk management but a contractual obligation for many GPs.

As SESAMm CEO Sylvain Forté explained during the webinar, “As companies tend to be held in portfolios for a longer period of time, that need for information has increased. Oftentimes, there was a perspective that for direct investment, deal teams would provide sufficient information and management would provide sufficient information on portfolios. But as the timescale is expanding and expanding, and the duration of these investments continues to grow, we see that this has been a real change in terms of making sure that there are no emerging operational risks that would not have been captured at the diligence stage, emerging governance risk, litigation, and reputational risk exposure.”

Scale Has Changed the Equation

This challenge is compounded by scale. Private market portfolios today are larger, more global, and more heterogeneous than in the past. Secondaries transactions make this particularly visible: investors may need to assess and monitor hundreds of assets under tight timelines, often with limited access to underlying companies, making point-in-time ESG assessments particularly fragile and extremely time-consuming in inherited portfolios.

Manual, human-led monitoring processes that once worked no longer scale. The issue is not a lack of expertise; it is a lack of continuous, consistent visibility across portfolios.

From Static ESG Snapshots to Continuous Risk Visibility

What is replacing point-in-time ESG due diligence is not simply “more data,” but a different operating model.

ESG information is increasingly integrated into investment decision-making as a continuous input rather than a one-off compliance step. Benjamin Krusche, Strategy Director at Clarity AI, described this shift clearly: “The classical point-in-time due diligence really is breaking down, and what people are moving towards is a much more continuous updating of the initial thesis, a continuous monitoring of this risk as well.”

Continuous monitoring allows investors to track emerging issues across portfolios, reassess risk as conditions change, and compare exposures consistently over time, something static due diligence packs were never designed to do.

Why This Shift Matters Now

The move away from point-in-time ESG due diligence reflects a convergence of structural forces:

• Faster-moving, event-driven risk
• Greater reliance on external signals
• Longer holding periods
• Larger and more complex portfolios

Taken together, these forces fundamentally change the role ESG due diligence can play in private markets. It is no longer just a gate at entry but an ongoing input into investment and risk decisions.

As Benjamin Krusche commented, by the end of 2026, “the idea that you conduct due diligence once at acquisition and treat it as a finished product will look very outdated. The market is moving toward continuous, fluid monitoring of risk - not a one-off assessment that sits untouched in a data room until exit.”

For private market investors, the implication is not to abandon due diligence, but to recognize its limits, and to complement it with continuous, portfolio-level risk visibility that reflects how risk actually behaves today.

We have exciting news to share! The HFM US Services Awards 2022 judging panel—a diverse panel of leading hedge fund COOs, CFOs, CCOs, GCs, and CTOs—selected SESAMm as the best information and data provider!

Here's a little about why and how we earned this prestigious award.

Choosing the best information and data provider

From our event host, With Intelligence:

“With Intelligence HFM US Services Awards recognize and reward hedge fund service providers who have demonstrated exceptional client service, innovative product development, and strong and sustainable business growth over the past 12 months.

The rigorous judging process, based on the views of a panel of leading hedge fund COOs, CFOs, CCOs, GCs, and CTOs, ensures that the Awards recognize those driving up service standards across the sector and stand out from the crowd as the ones the big providers really want to win.”

A big thanks to SESAMm's investors, partners, and clients

We thank our clients, investors, and partners for your support and patronage. Thank you for being such a big part of SESAMm; you're why we do what we do, and many of you have been involved since day one. And your generous and encouraging attitude has helped get us here today.

One of seven shortlisted in this category

After winning best use of artificial intelligence or blockchain at the 2022 HFM US Technology Awards earlier this year, we were encouraged to apply for best information and data provider. As a result, the judging panel selected SESSAMm as one of seven providers shortlisted for this award.

To be eligible for this award, we had to apply and provide details about our client service initiatives, the innovative product development we conducted, the growth we experienced over the past 12 months, and more. For the best information and data provider category, the criteria the judges look at are:

• Commercial success and business growth
• Demonstration of product or service innovation
• Description of future product or service development possibilities
• Positive customer feedback via submitted testimonials

Honored and excited

Of course, we're honored to earn best information and data provider at 2022 HFM US Services Awards. We're also excited for our clients and partners because our products and services are game-changers for hedge fund services. And while we have more work to do and clients to serve, we think the future looks bright for us, our partners, and our clients.

About SESAMm and TextReveal

SESAMm is a leading NLP technology company serving global investment firms, corporations, and investors, such as private equity firms, hedge funds, and other asset management firms. Through TextReveal®, we give you NLP capabilities to generate your own alternative data for use cases, such as ESG and SDG, sentiment, private equity due diligence, corporation studies, and more. And with access to SESAMm’s massive data lake, made up of 20 billion articles and messages and growing, you can make better investment decisions.

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