Assets held in alternative ESG funds surged from $29 billion to $92 billion between 2020 and 2022, according to Preqin, with European firms driving the bulk of this.
These were the findings in Preqin’s annual ‘ESG in Alternatives’ report, which found alternative investors are increasingly flocking to ESG and impact strategies.
Europe-based strategies secured 79% of the capital raised in this three-fold increase to 2022, followed by 14% in North America and 7% in Asia.
In terms of asset classes, Infrastructure funds took centre stage in 2021, securing $39bn, surpassing private equity’s $26bn.
The average size of ESG funds also increased from $400 million in 2017 to approximately $600 million in 2022.
Impact investing was also covered in the report. The aggregate capital raised for impact investing doubled from $13 billion in 2021 to nearly $34 billion in 2022.
Despite recent Europe’s surge as a market for ESG investment within alternatives, it has fallen behind North America’s impact investment.
Over the last decade, North America raised 59% of its capital in impact investing, compared to 37% in Europe and 2% in the Asian Pacific region.
Additionally, Europe-based managers were found to have the highest average and median transparency metrics.
These reports are the latest developments in a trend that suggests European asset managers are leading the way ahead of their US counterparts.
Earlier this month, the Global Asset Management Survey from Linedata found the majority of European managers are prioritising ESG, unlike US firms.
Around the same time, unofficial watchdog ShareAction found that out of the world’s 77 largest asset managers, only 10, all European, had committed to restricting investment in the most harmful of fossil fuels in their funds.
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