by Lucas Fioretti, Private Markets and Impact Strategist
The sustainability-focused private markets are in a very interesting time with the macroeconomic headwinds stemming from slowing economic growth, abnormally high inflation, and supply chain disruptions. These factors are competing with the strong momentum around deploying solutions to address climate change, environmental degradation, and social justice. Ambitious government and corporate net-zero commitments and an enormous inflow of mission-driven talent, coupled with the world facing unrelenting extreme weather and social unrest, highlight the demand for massive investment into this space.
It is undeniable that public valuations have decreased significantly over 2022. With the private markets following close behind, it is becoming more difficult for companies to avoid flat or even down funding rounds, while the cost of capital continues to climb; these trends could likely persist in the near-term. However, we view this market downturn as a blip on the radar for the sustainable investment landscape over the long-term. In some ways, this correction can be seen as a welcome return to earth and an opportunity to normalize valuations and focus on companies and sectors that represent quality, essential solutions. Additionally, the fund managers in which we invest are disciplined and skilled investors that prioritize fundamentals and have experience investing across market cycles.
In other words, despite jitters and volatility, well-run companies and sound projects around sustainability will continue to attract demand and receive capital. It is clear that the coming transition towards a low-carbon, renewable, and just economy will require huge amounts of a capital and may be the biggest investment opportunity of our time.