Adoption greatest in Europe, but North America dominates in climate funds

[tile image] ESG in Alternatives 2024


Preqin’s ESG in Alternatives 2024 report highlights the differences in uptake of ESG among asset classes and regions. It also explores ESG fund performance versus non-ESG funds, as the opaque nature of the alternatives market creates a challenge for benchmarking.

  • The US continues to lag Europe in ESG fundraising and assets under management (AUM). European fund managers account for 68% of the amount raised by ESG funds globally in 2024 to the end of April. Additionally, Europe ESG funds account for 55% of both ESG funds currently in market globally and capital targeted for fundraising.

  • Europe has dominated impact fundraising so far this year, increasing its share of aggregate capital raised from 67% ($15.0bn) in 2023 to 79% ($5.2bn) by April 2024. North America took the majority in climate funds’ aggregate capital raised, raising $15.0bn, or 82%, of the total globally in 2024 by April.

  • Private equity and infrastructure continue to dominate ESG fundraising. They collectively accounted for 66% of all ESG funds raised ($55bn) in 2024 to April, or $18.4bn and $17.9bn, respectively.

  • A record 59% of infrastructure deals were in renewables in 2023, while 72% of the $1.23tn of capital raised since 2014 with exposure to renewable energy was by infrastructure funds.

  • Private ESG funds’ performance is not significantly different from non-ESG private funds overall, according to Preqin data. The average internal rate of return (IRR) of ESG funds was 13.5%, compared with 15% for non-ESG private capital funds, when looking at a sample of 215 ESG funds and 10,812 non-ESG funds.

ESG fundraising reached a high in 2022, despite tough macroeconomic conditions across alternatives, indicating that ESG funds were able to differentiate themselves and capture investors’ attention. However, this was before rising rates and pressure across portfolios led some investors to de-prioritize their ESG ambitions. As a result, 2023 was a much tougher year for fundraising. Despite this, ESG fundraising to the end of April this year is tracking at $55bn – a similar pace to that seen in the standout 2022.

Alex Murray, VP, Head of Real Assets, Research Insights at Preqin said: ‘The strong growth in ESG fundraising across private markets suggests more managers want new funds to be aligned with ESG fund requirements. The reasons vary from being more able to raise capital to aiding risk management and deal selection strategies. Regardless, the still relatively nascent sector within alternatives will continue to grow, owing to Europe’s more developed regulatory environment.’


The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin providing the information in this content accepts no liability for any decisions taken in relation to the above.