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We believe that private markets investing can act as an important lever in the transition towards a more sustainable world. Such investments are well suited to integrating sustainability risk analysis given the detailed information received during due diligence phases. Depending on the asset class, it is possible to influence the terms of the investment and engage throughout the investment lifecycle to improve ESG practices.
Private markets investing also offers the opportunity to invest in real economies, identifying and incubating important future themes and playing a collaborative role in engaging with corporates on key sustainability targets.
The breadth and depth of our private markets strategies – reflecting the diversity of our investors’ objectives – means that we provide sustainable investing at different levels of incorporation, such as through sustainable-focused strategies (eg, renewables and infrastructure) and in our impact and development finance approaches.
How we integrate sustainability risks
Recognising the potential impact that sustainability risks can have on the performance of an investment, we integrate ESG factors throughout all investment processes across our private markets platform. We take a systematic approach, from the sourcing and due diligence phases through to monitoring and engagement activities. This way, we identify sustainability risks and take steps to adequately manage them in each investment decision, while also monitoring them throughout the life of the asset.
One challenge the market faces is the availability of data and transparency to fully inform on ESG topics. We continue to consider the best way to tackle this challenge in terms of engaging with our assets to collect the information, leverage that information in the investment process, and report on it to our clients and to meet increasing regulatory needs.
As a private markets investor, we can engage and steward the assets and funds we invest in through the levers of influence specific to each strategy. We take this role seriously and seek to push the market towards best standards, leveraging and inputting into industry initiatives that support that goal including via GRESB, the Institutional Limited Partners Association, and the Long-Term Infrastructure Investors Association.
Private markets investments can act as an important lever for change towards a more sustainable world
A history of sustainable investing
We have more than 10 years’ experience in delivering sustainable outcome-led investment offerings since our first third-party renewables investment in 2012. We are also one of the first movers in delivering blended finance vehicles where investments from both institutions and public funds are combined to create opportunities to create impact, especially in emerging markets, thereby de-risking these opportunities for commercial investors. This helps us mobilise large-scale private capital for development in emerging markets and support closing the estimated USD 4.2 trillion financing gap of the UN Sustainable Development Goals.
Our impact approaches are focused on enabling clients to invest with both their financial objectives and sustainable goals in mind. We aim to increasingly be able to support those investors who want to see a positive change for the planet while generating a return – and our impact investing approaches provide solutions to do so.
Delivering credible impact
We do not believe investors have to trade financial returns for impact. Rather, the greater quantification of impact returns can help support financial returns. In fact, as non-financial returns become an increasingly important factor, they could provide a strong technical tailwind. The more that the industry can quantify and qualify those non-financial returns, the more likely it is that these will not only completement but also support financial returns.
Sustainable approaches for AllianzGI’s Private Markets platform
The future growth opportunity of impact investing depends on asset managers demonstrating how the impact can be measured and reported, and this is an important element that feeds through our approaches. Our Impact Measurement and Management team – set up in 2021 – has developed an impact framework for the due diligence, measurement and management of private market impact investments throughout the investment lifecycle.
As we look to the future, we expect to see even greater growth in the impact market and the opportunities available to our clients. Where investors previously thought only in terms of risk and reward, we expect they will begin to add a third dimension of oversight to their portfolios: impact – and private markets investments are well placed to deliver on this need.