Climate-focused fund managers worry about a continued lack of liquidity in the market, policy uncertainty and the politicization of ESG and climate. But market economics, state-led action and an emphasis on energy security will propel the market forward, according to a survey of fund managers by CREO, a nonprofit that mobilizes capital from family offices for climate impact.
After nursing their portfolio companies in 2024 amid a funding squeeze, GPs are looking forward to deploying more capital into new opportunities this year. Over two-thirds of the managers plan to increase capital deployment in 2025.
Their top sectors include energy storage, generations and distribution, agriculture, advanced materials and land conservation and restoration. Out of favor: food and beverages, autos, and charging infrastructure, likely reflecting new political headwinds for EVs.
Pipelines and exits
CREO surveyed 127 climate-focused fund managers across 127 countries with an aggregate $994 billion in assets under management.
Three-quarters or respondents anticipate an increase in investable opportunities; infrastructure managers are the most upbeat, with 83% seeing a robust pipeline. A little more than half of fund managers see the exit environment improving this year, and just slightly less than half believe exit valuations will rise as well.
Fund managers overall also see their net asset values, or NAVs, rising this year. The exception: 40% of venture and growth funds see NAVs taking a dip.
Fundraising sentiment is still largely pessimistic, and average fundraising times have stretched to 13-24 months. But patience is paying off. Some 80% of fund managers have closed or expect to close their funds at close to their targets. 70% of infrastructure managers reported hitting their fund targets, while private equity managers were more likely to exceed their funding goals.
In a tight fundraising environment, climate-focused fund managers have become more reliant on family offices and high net worth individuals. Such investors were the most active investor category, cited by 30% of fund managers. More than a third of GPs surveyed said these wealthy families comprise more than half of their committed capital.
