Asia-based funds gain traction as raised global capital increases: report
Natalie Tan
ASIA-based funds raised US$11.7 billion, or 12.7 per cent, of the US$92 billion amassed globally by environmental, social and governance (ESG) private-capital funds, a report by investment data company Preqin showed.
Although the number of such funds in Asia decreased, the aggregate capital raised has increased exponentially, signalling a higher concentration of capital, the report said. This suggests that instead of being the preserve of “smaller, niche managers”, impact strategies have become more mainstream.
Within the Asia-Pacific, capital raised by ESG private-market funds reached US$15.6 billion, a 10-year high and an increase of 22 per cent from the previous year. The majority of this capital can be attributed to private equity fundraising, which rose from US$1.8 billion to US$11.8 billion in just a year.
Despite the proportion of capital raised by infrastructure funds dropping, infrastructure remains a well-funded asset class due to “the environmental and societal outcomes that infrastructure projects can claim to deliver”, the report noted.
Meanwhile, Europe-based funds raised US$62.1 billion, making up 68 per cent of global ESG private-capital funds. This is the lowest share for Europe since 2016.
The report found that ESG assets under management are expected to grow to US$3.3 trillion in Apac in the next four years, exceeding the projected growth rates in Europe and North America.
In terms of transparency of ESG policies and practices, manager transparency in Asia was the lowest globally, at an average of 5.5 per cent on Preqin’s transparency metrics. In comparison, Europe-based fund managers exhibited the highest average degree of transparency at 15.1 per cent, closely followed by Australasia- and Africa-based managers.
The disparity is caused by the fact that many fund managers in Asia are still in a transitional period. Many are still setting up ESG frameworks and teams, leading to insufficient data and suitable benchmarks to measure ESG integration and performance. As a result, it may be “more difficult for stakeholders and investors to adapt to include these considerations, for now”, the report stated.
However, as regulation becomes more robust and ESG investment gains acceptance, operational costs to accommodate ESG investing and disclosure frameworks will continue to increase. According to Preqin, “there is potential for fundraising growth for ESG-related funds, as the popularity of, and requirements surrounding, ESG among many international investors have increased”.
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