First, the bad news: Fundraising for impact investment funds tanked last year – for the third consecutive year.
Pension funds, family offices and other LPs are writing fewer checks to fund managers, from startup investment firms with completely new strategies to established managers raising billions in well-understood asset classes.
The good news: Savvy and persistent managers are navigating the parched landscape and may be able to ride the upswing when it comes. As the old saw goes, the worst time to raise a fund is the best time to invest it.
Investors aren’t less interested in impact, they’re just sitting on their checkbooks. Most LPs – 89%, according to a recent Pitchbook survey – are sticking with or growing their impact mandates.
“We are not seeing asset owners shy away from impact, and over the long term, the growing number of impact mandates announced by institutional investors will flow into allocation,” observes Jacob Haar of Community Investment Management, a debt provider to inclusive lenders. Haar serves on the board of Impact Capital Managers, the network of impact fund managers.
“Good managers are having success raising capital,” Haar says. “While closing timelines often are longer, particularly among venture strategies, closings are happening, and happening at size for managers focused on achieving both compelling impact and financial return targets.”
Differentiated edge
ImpactAlpha wrote last year that investors would reward managers with innovative strategies. Haar says allocators are placing a premium on specialization and strategic clarity. “Managers with a tight thesis, differentiated edge and a credible path to value creation are able to break through more consistently than generalists.”
Just this week, New York-based Superorganism, a first-time fund manager, closed its flagship fund at $25.9 million to invest in tech startups supporting biodiversity protection and preservation. The investment theme – woefully underfunded in relation to the urgency of the issue – attracted Lukas Walton’s family office, Builders Vision, along with AMB Holdings, Cisco Foundation, Understorey Ventures and other LPs.
“It’s not about convincing people, it’s about finding people that are excited about what you are building,” Superorganism’s Kevin Webb and Tom Quigley tell ImpactAlpha. “It’s fair to say that biodiversity is not an obvious answer for everyone, or else there would be more biodiversity focused funds out there.”
Also successful: Place-based fund strategies, including UK-based Bridges Fund Management’s sixth sustainable real estate fund for the UK and Europe. Mission Driven Bank Fund reached a $200 million final close to finance lending institutions working in underserved communities in the US. American South Capital raised $60 million to invest in and develop affordable housing in the US South with local partners like Invest Chattanooga in Tennessee. New York-based MSquared hit a $139 million first close for its second Equitable Housing Solutions Fund.
Funds focusing on ocean health and the blue economy, one of the least-invested of the 17 Sustainable Development Goals, also had an active year. Octave Capital, the in-house impact fund of Singapore-based Tsao Pao Chee Group, partnered with Norway-based Katapult on a $75 million Asia-focused ocean fund. SWEN Capital Partners inked €160 million for the first close of its second ocean fund. The Global Centre for Maritime Decarbonisation and Singapore-based AIM Horizon Investments secured $35 million to decarbonize the shipping sector by financing green retrofits to vessels.
Impact fund managers that reached first or final closes in 2025 range from large private equity firms like Brookfield, Mirova, TPG’s Rise Fund and Climate Fund Managers, all of which are out with institutional-level climate and energy strategies, to first-time managers like Ecuador-based Impaqto Capital and Netherlands-based SevenGen Investment Partners.
The latest Pitchbook data on private impact fundraising shows funds closing just $36.7 billion in commitments last year. Those numbers could bump up as more data trickles in from smaller funds. In any event, the total is far below the $82.6 billion raised in 2024, and way down from the peak of $161 billion in 2022.
ImpactAlpha has tracked dozens of fundraising milestones in the past year, as sentiment swung from gloomy to cautiously optimistic to frustrated. A busy week in August, for example, clocked at least 10 impact fundraising milestones for firms based in the US, Australia, Europe, Africa and Latin America. By the end of the year, many LPs were pushing decisions into 2026.
“There was a lot of volatility in investor sentiment last year,” acknowledges Haar, “but there’s been an adjustment as allocators respond more to data than headlines.”
Equity vs. debt
The difficult fundraising environment disproportionately hit venture fund managers, which account for nearly 1,900 of the 5,000 impact funds Pitchbook tracks. Impact private credit fund managers capitalized on investor interest in opportunities for liquidity and reliable returns.
Impact private credit, like private credit more broadly, has been a hotspot for LPs over the past year – so hot that some lenders have gotten nervous. There are few such institutional-level impact private credit funds in the market, making the available opportunities even more attractive.
“While we have seen significant growth in private credit generally among institutional investors in recent years, private credit allocations in impact have not yet caught up with their non-impact peers.,” Haar says.
Already this year, Chicago-based Creation Investments Capital Management announced a $46 million raise for its second Impact Credit Fund to support financial inclusion in emerging markets, especially India.
Pitchbook cites Denmark-based Capital Four’s $3.2 billion raise for its fifth private debt fund as the largest private-debt close last year. The fund has an EU Article 8 sustainability designation because sustainability-linked loans are a key part of the strategy.
Many of the larger debt funds raised last year focus on green infrastructure, a capital-intensive sector that can absorb large checks. Among more modestly-sized infrastructure debt raises was Frankfurt-based Prime Capital, which closed €130 million fund to lend to small and mid-sized European infrastructure developers. Africa50 reached a $118 million first close for its Alliance for Green Infrastructure in Africa Project Development Fund.
Euro zone
Impact funds based in and focused on Europe have for the past three years outpaced North American fund managers in total fundraising. Europe now accounts for nearly 38% of committed impact capital. Political and regulatory volatility in the US is driving LPs into other regions, particularly those searching for climate opportunities.
“This aligns with the perception that European investors have shifted a large portion of their investment capital to focus on sustainable investing,” according to Pitchbook.
Last year, woman-led Eurazeo hit a €300 million first close for its Planetary Boundaries Fund to help European small and mid-sized businesses tackle environmental issues like pollution and biodiversity.
“We are witnessing significant momentum as investors recognize the need and opportunity to scale businesses providing solutions towards the environment,” said Eurazeo’s Sophie Flak at the time.
London-based climate VC firm Clean Growth Fund reached a £49 million first close for its second climate tech fund. France-based Ring Capital closed its impact growth buy-out fund at €217 million. Dutch venture capital firm Forbion raised €200 million, surpassing its €150 million target, for a fund that invests in biotech companies that can improve planet health.
“Biotechnology is moving beyond healthcare to tackle global challenges in food, materials and resource efficiency,” said Forbion’s Alexander Hoffmann.
Italy-based Maia Ventures, a first-time fund manager, secured €55 million, and Finland-based Nordic Foodtech VC raised €40 million for its second fund. Both invest in European tech companies focused on the food sector.
Real economy
As elsewhere, emerging market-focused debt fund managers seemed to fare better through last year’s collapse in development assistance than their equity-focused peers.
Investors’ renewed skittishness about emerging markets was especially hard on fund managers focused on Africa, where the average time to close fundraising has stretched to more than two years. LPs are gravitating to larger funds and established managers, according to AVCA, an industry association for private equity investors in Africa.
Investors interested in Africa are concerned about liquidity, says Isaac Marshall of TLG Capital, which provides bank-guaranteed loans to mid-sized businesses in Africa’s least developed markets, including Benin, Togo, Guinea and Djibouti. The firm secured more than $82 million for the first close of its second Africa Growth Impact Fund. TLG has about $18 million more in commitments for its second close, expected in March.
“We’re quite downside protected. We just keep layering downside protection until it looks like it’s really hard to lose money,” Marshall says. “We have several investors in our fund that are investing in Africa for the first time – some of them with double-digit million tickets.”
Other LPs are reinvesting in the region after having disengaged for some time.
India and East Africa-focused Beyond Capital Ventures complements its equity strategy with a debt fund. Senegal-based WIC Capital uses revenue-sharing agreements to generate liquidity for LPs and to make new investments.
Paris-based I&P reached a €41 million first-closed for its third I&P Afrique Entrepreneurs loan fund, which is helping small businesses adapt to climate change. AfricInvest Group raised €50 million in a first close of its third French-African Fund for small and mid-sized businesses in francophone Africa. UK-based Enko Capital raised $100 million for its first private credit fund for African mid-sized businesses in agriculture, manufacturing, renewable energy and other core economic sectors.
African economies are going through a reset period after a difficult five years, Marshall notes. Economic turbulence caused by the pandemic exposed unsustainable sovereign debt loads, and caused several, including Ghana, to default. Early last year, the Ghanaian cedi was one of the best performing currencies in the world.
“To some degree, Africa looks safer than investing in US capital markets, with the degree of frothiness and political uncertainty,” Marshall says.
Credit funds like TLG’s are taking positions in “real-asset, cash flow-positive businesses in telecoms, essential healthcare, schools,” he adds. “It’s very ‘real economy’.”
Erik Stein contributed reporting.
