ESG investing now makes up more than one-third of private capital under management with an estimated $3.1 trillion committed, according to a Preqin report issued Wednesday.
According to Preqin's ESG in Alternatives Report 2021: Navigating the Climate Crisis, that represents 36% of $8.52 trillion of private capital under management globally.
The highest rate by asset class is private debt, with 49% of assets committed to ESG, while infrastructure managers had the lowest rate at 31% of assets, the report said. By assets, private equity led, with $1.82 trillion focused on ESG funds.
Preqin estimates that ESG-committed managers raised $403 billion in the first nine months of 2021, compared to $506 billion raised in all of 2020.
The report also predicts that a new asset class for carbon "is on the horizon," as carbon emission trading is expected to be a key part of reaching net-zero goals.
Preqin now analyzes limited partners and general partners on transparency of ESG practices. It found median disclosure of four out of 27 indicators, with managers of $100 billion or more averaging an ESG transparency metric of 70%.
A Preqin survey in June found investor demand to be the leading reason that fund managers are establishing ESG policies. The future for ESG in the alternatives industry "will be a combination of client demand and regulatory pressures that will continue to push managers into prioritizing ESG," the report said.
Jaclyn Bouchard, head of ESG at Preqin, said in the release that "the alternatives industry has come a long way in its understanding of ESG." Market participants of all sizes "will be expected to increase their ESG transparency to meet expectations and avoid the pitfalls of greenwashing," she said.