New Private Markets Key Terms and Glossary
New Private Markets’ glossary is designed to help investors, fund managers and other stakeholders navigate the fast-evolving language of sustainable finance and private capital. It brings together clear definitions of core concepts such as ESG, DEI, impact investing and blended finance, alongside emerging themes shaping value creation across private markets – from climate solutions and the circular economy to affordable housing, employee ownership and financial inclusion. The glossary also covers key risk and reporting terminology, including natural capital, human rights, physical risk and transition risk, as well as the frameworks and regulation increasingly guiding sustainability strategy, disclosure and investment decision-making. Whether you are assessing impact-linked carried interest structures or building an investment thesis around sustainability, these terms provide a shared vocabulary for analysing performance, impact and long-term resilience.
Affordable Housing
Affordable housing in private markets refers to investments that expand access to safe, reasonably priced homes for low- and moderate-income households. These strategies typically aim to deliver risk-adjusted returns aligned with social impact. Prominent managers of such strategies include Vistria Group, Nuveen and Jonathan Rose Companies.
Blended Finance
Blended finance uses concessional or catalytic capital—often from public or philanthropic sources—to mobilize additional private market investment into projects or sectors. In the context of private markets it helps de-risk early-stage projects, improve commercial viability, and channel capital toward climate mitigation, resilience, and inclusive development opportunities that might otherwise struggle to attract conventional funding.
Circular Economy
In private markets, the circular economy refers to investment strategies that reduce waste and extend product life cycles by supporting recycling technologies, resource-efficient manufacturing, reuse platforms, and closed-loop supply chains. These investments can lower environmental footprints, strengthen regulatory compliance, and create operational efficiencies that improve long-term value and resilience across portfolio companies and infrastructure assets. Prominent circular economy investors include Closed Loop Partners, Circulate Capital and Summa Equity.
Climate Solutions
While strict definitions vary, climate solutions encompass investments that mitigate greenhouse gas emissions or enhance climate resilience. This includes renewable energy, energy-efficient technologies, low-carbon materials, sustainable agriculture, and adaptation infrastructure. Private equity and private credit play key roles in scaling these solutions by providing capital and operational expertise to accelerate decarbonization.
DEI
Diversity, equity, and inclusion (DEI) in private markets refers to ensuring fair access, representation, and opportunity within investment firms and portfolio companies. Stronger performance on DEI is widely viewed as supportive of better decision-making and workforce engagement. It is pursued either through investment strategies that back founders or business leaders from underrepresented groups, or through portfolio-focused initiatives around hiring practices and employee engagement.
Employee Ownership
Employee ownership in private markets involves structuring portfolio companies so workers benefit from the economic upside of a successful exit. This can enhance employee retention, productivity, and long-term value creation while supporting equitable wealth distribution. Investors use employee ownership models to strengthen social sustainability, reduce turnover, and improve alignment across stakeholders.
ESG
Environmental, social, and governance (ESG) is a framework for assessing risks and opportunities across portfolio companies and assets. ESG integration supports investment decision-making, helps manage regulatory and reputational exposures, and identifies operational improvements that can drive improved financial performance and sustainability outcomes across private markets strategies.
Financial Inclusion
In private markets, financial inclusion refers to investments that expand access to affordable financial services for underserved individuals and businesses. This includes fintech, microfinance, and community lending platforms. By improving credit availability and economic participation, investors support social resilience while capturing growth in emerging and underserved markets with strong long-term demand.
Frameworks
Frameworks in private markets sustainability are structured tools and standards—such as ESG guidelines, impact measurement systems, and climate-risk methodologies—that help investors evaluate and report sustainability performance across assets. They provide consistent approaches for due diligence, monitoring, and reporting, enabling firms to align investment decisions with regulatory expectations, stakeholder priorities, and long-term environmental and social objectives. Examples specific to private markets include EDCI, the ESG Integrated Disclosure Project, GIIN’s IRIS+ framework, and frameworks produced by Project Frame and Invest Europe.
Human Rights
Human rights in private markets focuses on ensuring investments do not contribute to forced labour, discrimination, unsafe working conditions, or other abuses. Investors assess supply chains, labour standards, and community impacts, engaging portfolio companies to uphold international norms. Strong human-rights practices help mitigate legal, operational, and reputational risk while supporting sustainable long-term value.
Impact Investing
Impact investing in private markets involves deploying capital with the intention to generate measurable positive environmental or social outcomes alongside financial returns. Investors target themes such as climate action, health, housing, education, and inclusion, incorporating impact measurement frameworks and active ownership to ensure that capital meaningfully contributes to sustainability goals. Impact investment can be pursued through private equity, infrastructure, private debt, real estate and venture capital strategies.
Impact-linked Carried Interest
Impact-linked carried interest, or impact-linked carry, ties part of a fund manager’s performance compensation to the achievement of pre-defined environmental or social impact metrics. In private markets, this is undertaken to improve accountability, and reinforce the integration of sustainability objectives into investment selection, portfolio management, and value-creation strategies.
Natural Capital
Natural capital refers to the ecosystems and biodiversity that provide essential services such as water purification, carbon sequestration, and soil health. In private markets, investing in natural capital includes sustainable forestry, regenerative agriculture, conservation projects, and nature-based climate solutions that support ecological resilience and long-term value creation across real assets.
Physical Risk
Physical risk refers to the potential financial losses an asset or portfolio may face due to climate-related events such as floods, storms, wildfires, and heatwaves. In private markets, assessing physical risk is critical to valuing assets, structuring deals, and developing resilience strategies to protect long-term performance and operational continuity.
Regulation
Regulation in private markets refers to evolving policies, disclosure requirements, and supervisory expectations that govern how private equity, private credit, and infrastructure investors manage and disclose sustainability risks and impacts. These rules shape reporting, due-diligence practices, portfolio oversight, and investor transparency, influencing capital allocation toward climate-aligned, socially responsible, and resilient investment opportunities. Examples include the EU’s Sustainable Finance Disclosure Regulation (SFDR) and California’s climate disclosure laws.
Sustainability
Sustainability in private markets encompasses managing environmental, social, and governance factors to support long-term value creation, as well as impact investing strategies that target positive outcomes alongside financial returns. Sustainable practices in private markets strengthen resilience, meet stakeholder expectations, and help future-proof portfolios against regulatory, market, and physical risks.
Transition Risk
Transition risk refers to financial impacts arising from the shift to a low-carbon economy, including policy changes, carbon pricing, technological disruption, and evolving consumer preferences. In private markets, investors assess transition risk to manage downside exposure, identify climate-aligned opportunities, and support portfolio companies through decarbonization and modernization strategies.
Value Creation
Value creation in private markets involves strategic and operational initiatives that enhance a portfolio company’s performance and long-term worth. Sustainability-linked value creation includes improving energy efficiency, strengthening workforce practices, reducing resource use, and aligning products with emerging environmental or social markets—ultimately driving financial returns and competitive advantage.