Asset owners face a convergence of pressures – country and corporate-level net zero targets, rising energy demand and growing climate and transition risks – that are shaping investment flows. Against this backdrop, many are looking to fund managers that can source long duration, inflation-resilient returns, while demonstrably targeting net zero emissions with credible implementation plans. 

The latest Private Markets 700 (PM700) report from IFM Investors indicates many investors are looking to private markets to align their portfolios with transition-related objectives. Sustainability considerations are now embedded across private markets investment decisions, with 72% of respondents prioritising climate and transition risks, and 67% focusing on biodiversity- and nature-related risks. 

Private markets already account for 36.3% of institutional investor portfolios and allocations are expected to rise over the next three to five years. Two in three respondents (69%) to the latest PM700 say the energy transition is “unstoppable” despite recent policy changes – and are reflecting this certainty in their allocation decisions. In infrastructure specifically, 68% of respondents like energy transition-focused funds. 

From diversification to decarbonisation 

While investors continue to rely on private market assets for diversification and resilience, many are also exploring how to use these allocations as vehicles for climate solutions. IFM’s PM700 research shows that 35% of respondents use private markets to have a greater influence on the energy transition, reflecting their interest in aligning long-term capital with decarbonisation goals.

Read the full ‘Thought Leadership’ article at the link below