Net-Zero Funds Raise $300B, Report Shows

Impact investment funds focused on the energy transition have raised more than €271 billion ($301 billion) in the past seven years, according to a new report.

Impact investment consultancy Phenix Capital Group gathered data on 561 funds aligned to the goal of net-zero carbon emissions, with 253 currently open for investment.

The Netherlands-based consultancy reported that €271 billion had been committed towards net-zero funds since 2015.

Funds currently in the market were seeking a total of €86 billion from investors, the data showed. This included €54 billion being raised by private equity impact funds.

North America is the second-largest investor in net-zero funds, committing €74 billion over the period, followed by Europe with €85 billion. North American funds are currently looking to raise €17 billion in total, compared to European funds’ €32 billion.

While historically net-zero aligned funds were primarily invested in large-cap listed equities, of the funds currently seeking investment the majority were private equity vehicles, Phenix reported. Infrastructure funds were also popular.

Phenix’s report explained that “fostering net-zero investments is essential for financial institutions to deliver on the Paris Agreement”. It acknowledged a recent “surge in net-zero initiatives… while many financial institutions are making net-zero pledges”.

The report showed that 67 new net-zero funds were launched in 2020 and a further 60 in 2021.

So far this year new impact funds include the TGC Impact Growth fund established by women-led growth equity firm TGC Impact, which aims to provide investors with access to underrepresented markets.

Investors and asset managers increasingly embrace the United Nations’ Sustainable Development Goals, and the Phenix report highlighted that €182 billion had been raised since 2015 for SDG 13 — climate action — by net-zero aligned funds, as well as €142 billion for SDG 7, affordable and clean energy.

The same two SDGs remain popular with funds open to new investment, alongside SDG 11 — sustainable cities and communities — and SDG 9, industry, innovation and infrastructure.