The mood music in private markets fundraising has been downbeat in recent months.

With depressed valuations hitting public equities ahead of private equity, many LPs have found themselves overallocated to private equity and are dialling back their investment pace for the asset class. Nearly 25 percent of respondents to affiliate publication Private Equity International’s LP Perspectives 2022 Study say they are overallocated to private equity (registration required). It is a similar story in real estate; a third of institutions have found themselves over-allocated and “are incredibly cautious right now”, with some investors having stopped allocating, investment advisory firm Hodes Weill’s co-founder Doug Weill told affiliate publication PERE (registration required).

Yet impact funds – like other private markets funds – continue to come to market. The past two months have seen retail-focused L Catterton launch an impact strategy and Ara Partners open its third decarbonisation fund. Meanwhile, TPG, KKR, Apax, Leapfrog and Tikehau, among many others, are also currently raising impact funds.

There are some causes for those raising impact capital to be more optimistic than their mainstream peers in this environment.

Firstly, fresh pools of capital are joining the impact march. Paula Langton, head of ESG and Impact at Campbell Lutyens, is seeing established private equity investors such as foundations, family offices, banks, insurance companies and European pension funds creating dedicated impact or climate buckets.

Many corporates, such as Microsoft and Saudi Aramco, are backing venture and growth climate funds with strategic or balance sheet capital: for example, all known investors in Energy Impact Partners’ $1 billion climate technology fund and the Oil and Gas Climate Initiative’s $1 billion debut fund are corporates. Family offices in Asia-Pacific are looking for more private markets opportunities and “sustainable investment” opportunities, as we reported this week.

Climate-focused funds in particular are likely to fare well, with investors’ interest in climate showing no signs of cooling, several placement agents and investment advisers have told New Private Markets. Case in point: Lightrock’s Climate Impact Fund closed at €860 million in October, above its original hard-cap. In fact, concerns over energy security and supply chains, as well as extreme weather events globally over recent months, have put a spotlight on the need for clean energy supplies and infrastructure, and investors are keen to back the solutions, notes Campbell Lutyens’ Langton.

Strategies with a clear growth trajectory amid a global recession may be an interesting pitch for investors. “The themes we’re investing behind are such huge mega-trends with so much secular growth: health, education, climate – those will remain strong through the macro environment,” Peter Spring, a managing director on Bain Capital’s Double Impact team, said in October.

To be clear: few funds will find fundraising easy as we head into 2023. And while impact funds may have a compelling story to tell, many will find their previous investors among those who are pulling back. These funds may need to adapt their fundraising techniques to a changed LP market to reach their targets.