Difficult private markets fundraising conditions have put the brakes on impact fundraising in dramatic style, according to figures from the New Private Markets‘ database. After two years in which more than $72 billion was raised for impact strategies, the first half 2023 has been relatively barren: just $6.3 billion was raised across 30 funds. This equates to an average vehicle size of $213 million, compared with $520 million for the prior two years.
The fundraising statistics count the final closes of all funds and vehicles with fund-like economics, including co-investment funds, separate accounts and private mandates, with a closed-ended structure.
2021 and 2022 were standout years for private markets impact fundraising, with high volumes driven in part by the rise of climate as an investment strategy. Funds like TPG’s Rise Climate Fund and Brookfield’s Global Transition Fund both closed in 2022 on $7.3 billion and $15 billion, respectively.
While the data for H1 is liable to be revised upwards as additional fund closes from the period are unearthed, it seems clear that the wider private markets fundraising slowdown is biting in the world of impact.
This chimes with anecdotal reports from the firms currently trying to raise the two largest impact funds in the market. “Newer strategies are more impacted by the current fundraising environment in terms of time and size”, said Gustav Segerberg, head of business development at EQT, which is currently in market seeking €4 billion for its impact-oriented Future Fund. “And hence it’s also harder to reach the target fund sizes in today’s market.”
In May, TPG’s chief financial officer Jack Weingart said that the firm may not reach the initial $3 billion target for its third Rise Fund: “We set our original flagship fundraising targets [for Rise and the flagships of other strategies] under different market conditions,” he said. “We still expect each fund to grow compared to its predecessor, but in aggregate they may not grow as much as previously expected.”