Private credit has shifted from being a niche option to one of the fastest-growing areas of the alternatives market. Assets under management in the sector have already surpassed $1.7tn and are projected to double before the decade closes.
In the U.S., the market is being propelled by anticipated Federal Reserve rate cuts and a significant policy shift that allows 401(k) retirement plans to access alternative assets. This change could open up a $9tn defined-contribution market, dramatically increasing the investor pool for private credit, claims ACA Group.
As retail capital flows into the asset class, scrutiny is intensifying. While private credit presents new opportunities, it also carries higher fees, reduced liquidity, and added fiduciary responsibilities. For plan sponsors, meeting obligations under the Employee Retirement Income Security Act (ERISA) and minimising litigation risks will demand rigorous due diligence and greater transparency. For managers, this elevates the importance of having credible ESG data infrastructure, making it a fundamental requirement rather than a supplementary feature.
Limited partners are also reshaping expectations. Standardised ESG questionnaires are no longer sufficient. Investors now expect proof that ESG is not only measured but fully integrated into investment decision-making, risk oversight, and value creation. In an increasingly competitive market, the ability to demonstrate robust ESG processes has become a key differentiator in fundraising. Managers need ESG strategies that are flexible, transparent, and aligned with the realities of credit deal-making.
Traditional ESG data-gathering methods often fall short in credit markets. Tools designed for private equity, such as questionnaires, frequently provide incomplete insights when applied to credit strategies. Peer-benchmarked models, though popular, can be misleading in structured credit where engagement with underlying borrowers is limited. Complex structures like Collateralised Loan Obligations, involving hundreds of opaque borrowers, highlight the challenges of securing accurate information.
Nonetheless, managers who actively engage during direct lending have achieved better results. Building ESG considerations into deal processes early and maintaining strong relationships with borrowers, sponsors, or syndicate leads can generate more comprehensive datasets. Effective ESG engagement in credit requires adaptability, as influence can vary across stakeholders. Reliance solely on passive scraping or third-party scores risks missing the context investors demand.
For firms, ESG is no longer just about ticking boxes. Success depends on execution, transparency, and the ability to demonstrate follow-through. Embedding ESG insights directly into risk management, pricing, and portfolio oversight turns data from a liability into a strategic advantage. This creates a fundraising edge while delivering investors credible, decision-useful information.
Specialist providers such as ACA play an important role in operationalising ESG strategies. Their support in data collection, validation, and integration across complex portfolios helps credit managers manage the growing expectations of investors and regulators.
As ESG adoption grows, credit managers must also contend with a fragmented technology landscape. Many data platforms are tailored to single functions, leaving managers to piece together a patchwork of systems. To succeed, they require orchestration platforms capable of harmonising inputs, integrating disparate models, and producing decision-ready outputs.
ACA Ethos has been designed to fill this role. The platform combines AI-driven scraping, estimation models, and survey tools into one hub, reducing reliance on multiple vendors. Its dashboards and analyst overlays provide managers with an ESG workflow that is transparent, governed, and ready to inform investment decisions. By blending different data sources into a unified ecosystem, ACA Ethos transforms ESG from a reporting obligation into a genuine strategic asset.
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