Delayed fund launches to hit the market this year

Many European impact fund managers delayed the launch of new funds as a result of the global pandemic last year, but will go to market this year.

Air pollution in Shanghai. Photoholgic

Despite the growing interest in impact investments, 2020 saw a dramatic drop of new funds. This is one of the conclusions of a new Phenix Capital reporton impact funds in emerging markets.

Phenix Capital is an Amsterdam-based consultancy, best known for its database on impact funds. It registered 57% fewer new impact funds worldwide compared with 2019. The company’s analysts expect numbers to rise this year. Not only because investors increasingly see impact as fuel for financial return.

A lot of fund launches that were put on hold in 2020 will go ahead in 2021, said Dirk Meuleman, CEO of Phenix Capital.

Data from the past four months show that energy and climate change remain top priorities for impact investors worldwide. In emerging markets, Covid-19 has fueled investor interest in financial inclusion and agriculture.

Meuleman:"If anything, the pandemic has pushed investors to look more closely at more human basic needs such as access to food, access to finance and public health."

Focus on reducing CO2 emissions

In the new report, the firm concludes that 22% of all impact fund capital has been committed to emerging markets, which translates to over €77 bn globally.

Renewable energy is the most popular sector to invest in for funds that aim for impact in those parts of the world, according to the data.

"A large part of the future growth in greenhouse gas emissions is expected to come from emerging markets," said Phenix Capital CEO Dirk Meuleman to Impact Investor.

“We are excited to see that fund managers are finding opportunities in those markets that generate competitive financial returns while creating the necessary positive impact needed to move towards net-zero."

"Emerging market fund managers on the other hand seem to have been less affected by lockdowns and therefore have been able to perform fund launches as planned”, said Meuleman. That said, it should be noted that 34% fewer impact funds were launched in emerging markets last year.