We would have forgiven you, just this once, for not opening our full year impact fundraising report for 2023. It is difficult to get excited about a year in which closes on private markets impact funds accounted for just $23.8 billion of capital raised, representing a near-halving from the historic high of 2022.
To recap: this data includes capital raised in either a final or interim close for private markets funds, whether they are co-mingled, separate accounts or co-investment vehicles. It includes funds that carry the ‘impact’ label within our database and excludes conventional returns-only funds, even if they factor ESG considerations into their investment processes.
The 2023 fundraising freeze was a market-wide phenomenon. Private equity fundraising hit an annual six-year low. The private real estate market raised its lowest amount of aggregate capital since 2012. The data for infrastructure and private debt tell similar stories, with totals falling back to 2015 and 2016 levels, respectively.
The impact fund universe is still relatively nascent. Because of this, headline fundraising data is susceptible to dramatic swings; a single mega-fund can completely change the story.
A bit of horizon-scanning suggests that the story is indeed changing.
The start of the year has seen a slew of firms of various shapes and sizes holding interim or final closes on capital gathered amid last year’s fundraising tundra.
First-timers like Vidia Equity (€415 million for mid-market PE climate solutions), the Africa Africa50 Infrastructure Acceleration Fund ($222.5 million for sustainable infra) and Cross-Border Impact Ventures ($90 million for women’s and children’s health) all held closes. Established brands like GEF Capital Partners ($275.9 million for Climate Solutions II), Ambienta (circa €250 million for a debut credit vehicle), Giant Ventures (£250 million ($315 million; €293 million) for its second generation of venture capital funds), ArcTern Ventures ($335 million for climate venture) and Adenia Partners (has surpassed its $400 million Fund V target) all toasted success. Paris-based Tilt Capital hit a final close above target on €320 million this week for its first-time climate fund, the firm said.
And then there is the $10 billion raised by Brookfield Asset Management as it seeks to break records with its second Global Transition Fund. And the glut of climate-focused commitments announced at COP in December is yet to be reflected in the headline fundraising data.
Where does that leave prospects for fundraising in 2024? Placement agents spoken to by New Private Markets this week are optimistic that these green shoots portend a return to the long-term upwards trend for sustainable private markets strategies. One relays how around half of the in-depth market-mapping calls they have with investors reveals a new or enlarging allocation to sustainable strategies (typically climate). This chimes with research conducted by Mercer Investments, which suggests 50 percent of large asset owners expect their allocations to “sustainability/ESG funds” to increase in the next year (other high priority themes were infrastructure and private credit).
Last year may have felt like a fundraising year to forget; 2024 promises to make for happier reading.