There has been a tripling of annual ESG-linked capital raised in private markets between 2020 and 2022, rising from $29 billion to $92 billion, according to fresh data out today.
Recent years of fundraising growth have also seen the average ESG fund size increase from $400 million in 2017 to closer to $600 million in 2022.
There has also been a sizeable growth in impact fundraising across alternatives in recent years, particularly following the pandemic, an annual report from private market services provider Preqin found. Aggregate capital raised in impact funding increased from $2.6 billion in 2019 to $33.6 billion in 2022.
Whereas Europe-based funds dominate ESG fundraising, North American funds were found to lead in impact, taking 59% of aggregate capital raised since 2014 to May 2023, versus 37% for Europe and just 2% for APAC funds.
The report did also warn of potential difficulties for ESG funds ahead, particularly the anti-ESG drive led by Republican governed states in the US.
However, the researchers found that most private capital investors across the asset classes either already have or intend to implement active ESG policies within the next 12 months, with 52% of Infrastructure investors already having active policies in place.
Alex Murray, head of real assets at Preqin, said: “This report comes at a time when ESG faces new challenges from increasingly vocal and politicized critics. Further, a refocus on performance after a challenging 2022 may have encouraged some to de-prioritise ESG with fundraising so far in 2023 reflecting this."
Murray added however that "impact investing is emerging as its own distinct market. Rather than retrenching as many had anticipated, ESG in alternatives is increasingly diverse and sophisticated in what it can offer investors.”
Last week, Soojin Kim, head of ESG research at Preqin, noted how “super tricky” it was for asset managers to deal with the current plethora of sustainability standards.
