Europe takes the lead in private markets transition investing

Despite geopolitical headwinds, investor demand for energy transition investment opportunities is on the rise. A survey of 700 investment professionals, by IFM Investors, found that 72% view the transition as a long-term source of opportunities – particularly in private markets.

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The survey tracked private market investment strategies for 267 pension funds, 186 insurance investors, 146 wealth managers and 101 consultants. Respondents’ AUMs ranged from $5bn to over $100bn.

“The findings suggest sustainability is increasingly embedded in investment decision making processes rather than being a standalone investment theme”, IFM Investors said in a statement.

Interest was particularly strong in Europe, with 81% of respondents reporting an interest in transition-linked private assets. The report’s conclusion, based on the survey data, is that European investor confidence in the energy transition is shaping appetite for private market allocations.

Maria Nazarova-Doyle, IFM Investors’ global head of sustainable investment says the context of the findings holds crucial clues.

“The notable finding is not that European investors focus on sustainability. It is that their focus remains exceptionally strong despite ongoing geopolitical tensions, inflation concerns and broader market uncertainty”, she says.

Within the broader theme of the energy transition, infrastructure assets seem to attract a significant share of interest. 63% of the global sample said they were planning to increase infrastructure equity allocations – with the energy transition being a contributing factor.

The survey analysis suggests infrastructure’s attractiveness is linked to its ability to lend long-term thematic exposure and resilience to portfolios.

“Infrastructure can play a critical role in portfolios over the next decade and beyond”, Nazarova-Doyle explains.

“Whether investing in renewable energy generation, electricity networks, digital infrastructure or energy security, investors increasingly recognise that many of the world's most lucrative investment opportunities require structured long-term stewardship to generate returns and manage systemic risks”, she adds.

Nazarova-Doyle reckons sustainability is now a ‘baseline expectation’ of portfolio management and the kinds of managers asset owners are looking for. A conclusion that particularly resonates with the stewards of European patient capital.

Not only is European investor interest in private market transition investing on the rise despite headwinds, it is also becoming a cornerstone of their manager expectations