PitchBook News - ESG perception vs. reality

Most investors are probably aware of the politicization of ESG in the US, though those who think that this is only a US-based issue would be surprised to learn that a few of our non-US respondents also had some pretty negative things to say about ESG.

However, 39% of the survey respondents who said they do not incorporate ESG factors into their investment decision-making process have in fact declined to make an investment due to ESG concerns.

Thus, even respondents' perceptions about themselves don't align with reality. When people think ESG is just about values or some green hurdle, they ignore the aspects of the framework that assist in richer diligence practices.

Another perception we wanted to explore was that Impact investing equates to concessionary returns.

We've spoken to fund managers who do not want to be labeled as Impact funds because they are concerned that potential investors think that means they are being asked to accept subpar results and jump to a quick "no."

Our survey shows that 56% of our respondents who make Impact investments prioritize market-rate returns as the primary objective when evaluating investment opportunities. While concessionary return strategies do exist, when evaluating Impact funds, the assumption should not be that every such fund is concessionary.

When it comes to ESG, we asked asset managers (GPs) and allocators (LPs) if they were increasing or decreasing their focus on sustainable investment and also how they thought the other group was acting.

It was clear that most who are already practitioners of ESG or Impact investing are sticking with their approach, and some are even increasing focus.

But for many, the perception on each side, no doubt fed by news coverage, is that the other was decreasing. Things are not as they appear!

For more on how investors are navigating the global landscape, please enjoy our free report:

2024 Sustainable Investment Survey

 

Private debt has been rewarded for its solid performance with strong fundraising momentum.

In the traditional institutional channel—where it now ranks second to PE as the top fundraising strategy—newly committed capital is on par with 2023 and tracking toward five straight years of $200 billion-plus raised globally.

In the wealth channel, fundraising has accelerated by nearly 40% YoY and could exceed $60 billion in 2024 in the US alone.

In the insurance channel, credit has accounted for 62% of TTM gross inflows to the "big seven" US alternative asset managers, and half of that is from their insurance channels.

Our analysis of the public and private debt breakdown indicates another $20 billion in incremental fundraising for the latter.

Direct lending continues to be the preferred strategy within private debt and accounted for 55% of funds closed YTD. Mezzanine and infrastructure debt funds, which were in strong demand last year, have tapped out for the time being, creating a deceivingly monolithic appearance.

Beneath the surface, private debt is anything but "vanilla." Fund sponsors continue to innovate and iterate on new strategies and substrategies, ranging from asset-backed to structured credit to fill the gaps left vacant by the withdrawal of traditional bank lenders.

For more data and analysis, download our free Global Private Debt Report.