Private markets specialist firm Rede Partners has found growing demand from institutional investors for impact investing, despite broader fundraising challenges. The latest edition of its ‘Private Markets Sustainability and Impact Report’ surveyed more than 80 institutional investor limited partners (LPs) to take the temperature on sentiment, priorities and trends in climate, sustainability and impact investing. The results showed that 61% of LPs have increased their allocations to impact strategies in the past two years. More growth is expected this year, including some reallocation of capital from non-impact funds. Over half (58%) of investors also reported that climate-focused strategies – especially energy transition and decarbonisation – have increased in importance since 2022. In addition, 56% of LPs have been applying the same investment mandate to impact funds as they do to non-impact funds. These increases in allocations to impact strategies have happened in an environment where liquidity constraints force institutional investors to be more selective, Rede Partners noted. Although impact investment in private markets has historically focused on pure-play low-carbon businesses, the survey showed an increasing appetite for investing in transition strategies, with 75% of investors open to brown-to-green impact approaches. “Our research shows clearly that current market conditions continue to support an ongoing acceleration in impact investments, which has now matured into a distinct and sizeable market occupying an important niche within asset allocation strategies,” said Etiene Ekpo-Utip, Head of Climate and Impact at Rede Partners. “Investors’ growing allocations to sustainability-focused funds are being driven by their conviction that the sector offers opportunity for outsized returns. This conviction is particularly strong within the climate space, which they recognise as benefiting from strong structural tailwinds, a significant demand-supply gap for investments to grow into, and a relative abundance of investible opportunities.”
