Private market investors prioritise sustainable mandates
Impact and sustainable mandates will account for almost half (45 per cent) of private markets portfolios in two years’ time, up from 37 per cent today, L&G has predicted.
According to a new survey of 150 institutional investors carried out by the asset manager, asset owners believe they can achieve greater social and environmental outcomes through private markets.
77 per cent of asset owners are currently prioritising environmental outcomes in their private market portfolios, while 75 per cent are more focused on social outcomes. L&G believes that this trend is set to accelerate over the next two years.
L&G’s research found that defined contribution (DC) pensions schemes are expected to have the greatest number of impact and sustainable mandates, representing a total of 50 per cent of private portfolios in two years’ time.
Insurance investors are likely to have 47 per cent invested in sustainable mandates, while defined benefit (DB) pension schemes will be at 45 per cent.
81 per cent of the investors surveyed said that clean energy and renewable energy infrastructure were the top environmental outcomes that they are prioritising, identifying these sectors as providing the biggest investment opportunities in the near future.
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When asked what were the most attractive thematic trends to target via private markets, 59 per cent said the climate transition and decarbonisation.
As a result, institutional investors said that they wish to increase their allocations to infrastructure, private equity/venture capital, private credit, and real estate.
“As we set out earlier this year, our ambition is to expand our global private markets platform, giving clients access to a breadth of investment opportunities, particularly in private credit, real estate, infrastructure, and venture capital,” said Bill Hughes, global head of private markets, L&G Asset Management.
“This research confirms that investors are looking to increase their allocations to private markets for the potential increased returns they can deliver and also for their sustainability and impact characteristics.”
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“This research allows us to gain a comprehensive overview of the opportunities and challenges institutional investors face in allocating within private markets,” said Christy Lindsay, head of private markets distribution, L&G Asset Management.
“In our view, this can only grow in importance as a result of changing market and regulatory dynamics. As a long-standing investor in many of these critical sectors, we are well placed to help clients navigate their future private markets allocations.”
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