More than $4trn private capital assets invested in ESG

Preqin report finds uptick in flows to funds with ESG policies

Private money is increasingly flowing into investments with ESG considerations, including impact funds, according to a report published Thursday by Preqin.

Globally, 42% of private capital assets, or about $4.37trn, is invested in funds that include ESG policies, the London-based alternatives data provider found.

More than a third, 37%, of alternatives investors have active ESG policies. Among them, that is most common for private equity investors, at 43%, compared with 39% for private debt and infrastructure and 30% for hedge fund investors.

Since 2017, there have been 232 impact funds that have closed, globally, according to Preqin. There were 64 such closures last year, representing the highest number on record.

There is particularly strong interest in North America, where half of the impact funds in private equity and venture capital are based. Those asset classes account for 62% of impact funds that have either closed or are in the process of raising money, the report noted.

“As ESG continues to embed into private capital markets, tracking managers’ commitments is essential to inform investors who to select to achieve more sustainable portfolios,” Preqin head of ESG solutions and corporate responsibility Jaclyn Bouchard said in the company’s announcement.

“High-quality and reliable ESG data is essential to move from vision to reality. From our perspective, the more transparent the industry is on ESG reporting, the better our data and analysis can be for the whole private markets lifecycle – it is a symbiotic relationship.”

In the US, public companies are increasingly under pressure to report their climate risks and emissions. Numerous shareholders have successfully engaged with companies to provide that data, and a forthcoming final rule from the Securities and Exchange Commission will almost certainly require climate disclosure.

That trend also affects many private companies that have business with public ones, as reporting Scope 3 emissions can require getting data from vendors and product makers.

Many private equity firms have also agreed to collect data on greenhouse gas emissions and work toward standards for reporting.