Tech Advances and Consumer Awareness Bolster Performance of Climate-centric PE Funds

Forgoing traditional investing modes, climate-focused private equity (PE) funds are not just surviving - they’re thriving. Better technology, increased regulation, and heightened consumer awareness are steering this direction. If it upholds a competitive return rate, the sector could potentially increase its Assets Under Management (AUM) by a whopping 20% by 2029.

Analytical insights provided by a PitchBook note suggest that funds in this category, launched between 2016 and 2021, demonstrated improved overall returns versus non-climate-centric funds. This trend is particularly noticeable in slower-performing segments, suggesting valuable economic protection. These funds perform at par with their non-climate-focused counterparts, challenging the preconception of underperformance.

Geopolitical tensions underscore the importance of energy security, prompting policies encouraging reduced dependence on imported hydrocarbons. Despite the rolling back of climate-friendly regulations in countries like the US, performance remains the key driver of capital allocation. Accordingly, the AUM growth in this sector is expected to rebound and skyrocket to $563 billion by 2029 from the recent slump due to lagging fundraising activities.