The private investment market has steadily grown over the past 10 years, with investors chasing diversified returns and hedges against an increasingly volatile public market. This has been all the more apparent recently, with the global economy still reeling from the Covid-19 pandemic, increased geopolitical tensions across the globe and interest rates spiralling upward.
As a result, sustainable funds typically underperformed traditional counterparts due to their lack of exposure to fossil fuel energy, at a time when so many worried about energy security, and flows have also suffered.
However, the sustainable investment landscape adapts and evolves at a fast pace. Additionally, private markets are particularly well-suited to sustainable investing, as fund managers have direct ownership and control over the assets they hold. This provides abundant opportunities for engagement.
See also: The shape of things to come: Schroders Capital’s Zappia on the future of sustainable finance
Further, the long-term nature of the types of assets typically featured in the private markets are ripe for decarbonisation, such as within infrastructure where there are airports, toll roads and seaports, notes Maria Nazarova-Doyle, global head of sustainable investment at IFM Investors.
“The ability to take a long-term view, coupled with direct control over assets, makes private markets an investment of choice for asset owners focusing on sustainable and impact investing as it allows them to directly influence sustainability outcomes compared with public markets. This approach has particularly been effective in sectors critical to the energy transition and addressing climate change, such as renewable energy and green infrastructure,” she explains.
Read the full article in PA Future’s October 2024 digital magazine.
