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Phenix Capital: Almost a third of impact funds have net-zero focus 

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Published: 31 March 2023

Most of the total capital raised by net zero-aligned-funds was directed towards meeting UN sustainable development goals relating to clean energy (SDG 7), and climate action (SDG 13).

Over 30% of funds in the Phenix Capital Impact Database are aligned with net-zero targets | Sakorn Sukkasemsakorn on iStock

Phenix Capital Group said in a new impact report that 729 of the funds it tracks for its Impact Database – 31% of the total – are aligned with net-zero targets, with around 58% of those open for investment.  

In total, €289bn have been raised for net-zero-aligned funds, of which €162bn were raised by 228 global-focused funds, and €79bn were raised by 273 Europe-focused funds, according to the Dutch-based consultancy in its March 2023 Impact Report

Most of the total capital raised by net-zero aligned funds, some €240bn, was directed towards meeting UN sustainable development goals (SDGs) on affordable and clean energy, SDG 7, and climate action, SDG 13. The remainder was spread across other energy transition areas, such industry, transport, buildings, forestry,  agriculture and waste. Cleantech-focused funds raised €67 billion.

Other related investment themes included plant-based foods and the circular economy, among others. 

Phenix has been tracking allocation of capital to impact investing since 2015 to provide investors with market intelligence. It classifies funds that specifically collect and report to investors on measurements, such as GHG emissions reductions, as net zero-aligned. 

Capital raised by net-zero funds tracked by Phenix has generally been expanding over recent years. Fund raising for funds launched in 2022 is still going on, but those launched in 2021 raised €41 billion, much higher than the annual average over the last five years of €27 billion.

However, this was skewed by the €14bn raised through the 2021 launch of Brookfield Asset Management’s Global Transition Fund, which was of a scale unlikely to be repeated regularly by a single fund. The Brookfield fund is co-headed by Mark Carney, former governor of the Bank of England and Bank of Canada, and Connor Teskey. 

Despite the expanding market, the sums raised via funds targeting net zero remain a drop in the ocean compared to the amount of investment required to achieve that goal.  

Phenix cites analysis published in March by global coalition the Energy Transitions Commission (ETC), which concludes that some $3.5trn a year of capital investment will be needed on average between now and 2050 to build a net- zero global economy, compared with around $1trn today.  In the report, Financing the Transition: How to make the money flow for a net-zero economy, the ETC said 70% of that figure would need to be investment in low-carbon power generation, transmission and distribution. 

The ETC also said strong government policies relating both to the real economy and to the financial system would be vital if finance is to flow at the required scale required, and highlighted the need for more concessional and grant payments to support rapid coal phase-out, an end to deforestation and remove CO2 from the atmosphere.  

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