Heat waves hold investors' feet to the fire

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The Weekend Pitch

July 24, 2022

Presented by Golub Capital

(Drew Sanders/PitchBook News)

Nothing screams "climate emergency" quite like seeing smoke billowing down your street—in 104-degree heat—as three wildfires rage within a mile or so of your home. That was the sight outside my window on Tuesday night. I don't live in Australia or California, I live just outside London.

The average summer temperature in London is typically around the low-70s; wildfires are practically unheard of. It's not just the UK that's suffered. This week, we saw an unprecedented heat wave engulf the whole of Europe, with fires unleashing even greater devastation in France and Spain. Inevitably, my thoughts are drawn to the private markets industry and how it could help to mitigate the impact of human-induced global warming.

Private markets have a significant role to play in addressing the crisis. According to PitchBook's Q1 2022 Global Private Fund Strategies Report, fund managers have around $3.2 trillion in dry powder at their disposal and $9.9 trillion in overall AUM. As such, the industry has its hands on many of the economic levers needed to tackle climate change.

There are glimmers of hope. Investment in climate change-related sectors has been on the rise, though time is also limited. If sufficient action isn't taken, NASA predicts that by the end of the century, temperatures could rise to a point that would make some currently populated parts of the planet uninhabitable. But, given investors' so far inadequate response to the climate emergency, one wonders if private markets are up to the job.

I'm Andrew Woodman, and this is the Weekend Pitch. You can reach me on Twitter @adwoodman or at andrew.woodman@pitchbook.com.

Quote/Unquote

Stephen Schwarzman (Taylor Hill/Getty Images)

"We have a sense of the future that obviously isn't shared by the market today, but I have been through this a lot of times. At the end of the day, we will prevail."

—Stephen Schwarzman, chairman and CEO of Blackstone, told The Wall Street Journal. Last week, the New York-based firm posted a net loss of $29.4 million for the quarter ended June 30.

Deal flow

First-time funds have seen a decline this year after 2021's lucrative run, when 88 new funds closed on $16.3 billion. Through the first half of this year, 27 first-time funds have raised $5.2 billion in capital, according to PitchBook's latest US PE Breakdown.

Here is a look at five key insights from the report.

Did you know ...

(ilbusca/Getty Images)

…That European private equity funds are looking to raise more than $110 billion? The largest fund currently raising capital is KKR's sixth European buyout fund.

Despite macroeconomic uncertainty, there were 197 open PE funds in the market at the end of Q2—65 of which were launched since the start of 2021, according to PitchBook's latest data on private equity in Europe.

Datapoints

(Hitoshi Nishimura/Getty Images)

Roiling stock markets and tighter credit conditions are two of the many reasons for a prolonged liquidity drought for VC-backed companies. In the US, venture-backed exit value reached only $48.8 billion in the first half of 2022, about 6% of 2021's exit totals.

However, acquisitions maintained a steady deal count and drove exit value back to pre-pandemic levels.

Check out the latest data on US VC exit activity.

Surveying sustainable investing practices

Last chance! PitchBook is taking the pulse of investors and other private market participants on their incorporation of impact strategies and/or ESG risk factors. Please share your firm's approach to sustainable investing and what drives it. The survey, which will take about 10 minutes, closes July 29.

All who complete the survey will have the opportunity to enter a prize drawing, and for each completed response, PitchBook will make a donation to World Central Kitchen.

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This edition of The Weekend Pitch was written by Andrew Woodman and Priyamvada Mathur. It was edited by Chris Noble and Sam Steele.

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Heat waves hold investors' feet to the fire

Quote/Unquote

Deal flow

Did you know ...

Datapoints

Recommended reads

Older messages

What ESG means for real estate

The pulse of private credit fundraising

Bright spots in a rocky PE landscape

European VC dealmakers forge ahead

Sustainable investing in real estate

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