$282bn of capital was raised by 528 ESG funds over 2021 and 2022, compared with just $226bn by 629 funds over the preceding seven years. While 2021 was a strong year for private capital fundraising generally, the continued surge in ESG fundraising into 2022 made it a phenomenon distinct from the wider market. In light of this rush of capital, and alongside the onset of a tighter monetary environment, ESG fundraising cooled in 2023, but has seen a resurgence so far in 2024.
The mean (average) performance of ESG funds was 13.5%, compared with 15.0% for all private capital funds. This difference is not statistically significant, but ESG impact funds do show significantly lower returns at just 7.4%. Even accounting for asset class, there appears to be no difference in performance between ESG and non-ESG funds. However, ESG funds do show lower variance in returns, potentially because they are better able to manage downside risks.
The number of renewable energy deals tracked by Preqin from 2014 to April 2024 was 14,995. As many renewable deals are small in size it can be challenging to track deal value, but we track aggregate deal value across this period at $769bn. The growing relevance of renewables is evident in the share of infrastructure deals accounted for by the sector, which reached a record 59% in 2023, compared with 48% in 2014.
ESG in Alternatives 2024 provides the latest insights on developments in what is becoming a core competency for managers. Using data from Preqin ESG Solutions, and with help from our expert partners, this report provides a broad overview of the ESG market as it stands, with an analysis of the key trends, GP tactics, and investor views. The report explores the link between ESG and fund performance, as well as developments in ESG litigation, strategies outside of impact, and the growing relevance of renewables deals.
We aim to make sure every decision taken in alternative markets is a sustainable one. With this in mind, we’ve built ESG Solutions to give you the data and insights you need to integrate ESG into your decision-making.
Building on in-depth ESG KPIs and disclosures for LPs and GPs, we’ve extended our ESG Solutions product with ESG Risk Analytics and Impact Potential. These additions improve your visibility of fund- and asset- level risk with 147,000+ private company Risk Exposure Estimate Scores, and help you uncover opportunities across labeled and unlabeled impact assets with Impact Potential.
Private capital markets have undergone notable changes in recent years to incorporate ESG practices. There has been significant growth in climate and impact funds and the further advancement of investment in renewable energy towards achieving global climate goals. These developments are shaping the future of ESG investing, making it an exciting time to be part of this transformation.
Join our panel of experts, including LGIM and Edmond de Rothschild, who will provide insightful commentary on ESG fundraising markets, emerging analysis on ESG fund types and performance, and a deep dive into the importance of renewable energy to achieving environmental outcomes in line with global climate goals 2050.
Register here
Impact investing often sparks curiosity and debate in equal measure. Can financial goals align with positive non-financial outcomes? Despite questions, the movement is surging and credible and accurate data is crucial at the investment due diligence stage. With evolving ESG regulations, robust, granular, and auditable data is essential.
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