PitchBookPitchBook Data,Inc.John Gabbert Founder,CEOThe State of PrivateResearch and EditorialMarket ESG and ImpactDaniel Cook,CFA Head of Quantitative ResearchInvesting in 2024Institutional Research GroupAnalysisinvesting space in 2024 and beyondHilary Wiek,CFA,CAIASenior Strategisthilary.wiek@pitchbook.comaccurate,and hard-to-find data for professionals doing business in the private markets.anikka.villegas@pitchbook.comKey takeawaysDataSome asset managers are pulling back from public ESG commitments whileCollin Andersonothers are leaning into ESG as a value creation and protection tool in theData Analystchallenging macroeconomic environment.pbinstitutionalresearch@pitchbook.comThe financial performance of ESG-committed asset managers varies,butquantitative evidence that the use of ESG in the private markets necessitatesPublishingsacrificing returns has not emerged.Regulation of ESG-related claims and activities remains difficult to implementPublished on March 21,2024and comply with,but SFDR instills hope that public disclosures will improveaccess to better-quality data on private fundsContentsThe materiality of environmental issues has come into focus for some industriesKey takeawaysand geographies more than others.The pandemic-era emphasis on diversity,Trends in private market ESGequity inclusion has reversed,at least in the US,and governance is in thespotlight following a series of high-profile incidents and with the evolution of Al.Trends in private market Impact investing 9Investors are still debating whether it is better to bring to market a focusedoffering or be more general in the impact they are seeking.Fundraising for Impact funds appears to be down dramatically for 2023,butemerging Impact managers have had a higher success rate than in the generalfunds population.While the top Impact asset-gatherers also have strategies that are not dedicatedto Impact investing,name brands may not be as powerful in the Impact space.Impact funds targeting climate solutions have been taking ever-larger shares ofImpact fund commitments,as determination to take action has received bothgovernmental and private sector support.Fund return data does not support the narrative that Impact investing isequivalent to concessionary returns.1PitchBookPitchBook Analyst Note:The State of Private Market ESG and Impact Investing in 2024Anikka VillegasTrends in private market ESGSenior Analyst,Fund StrategiesSustainable Investinganikka.villegas@pitchbook.comSome asset managers are pulling back from public ESG commitments as programsare deprioritized and greenhushing proliferates.The past few years have seen extreme backlash against the use of environmental,social governance (ESG)analysis in the US,with politicians and other public figurescalling for its abolition and some even proposing that its use become a felony.'Simultaneously,the macroeconomic environment,particularly elevated interestrates and recent uncertainty about a potential recession,have made the path to highinvestment returns more difficult,forcing asset managers to reevaluate their strategicpriorities.These factors have led to two outcomes.First,some GPs have chosen toforgo or decrease their focus on ESG strategies because of the backlash or to focusmore on investment fundamentals and financial performance,given the pressuresfaced by private funds in 2022 and 2023,per our 2023 Sustainable Investment Survey.Second,a portion of the asset managers that have ESG programs or are consideringimplementing them is shifting the language used to discuss them or decreasing anymention of them entirely,a practice sometimes called "greenhushing."This is a significant departure from the rapid adoption and branding around ESG in theprivate markets that transpired at the beginning of the pandemic.Case in point,thenumber of new GPs making public commitments to ESG each quarter via the Principlesfor Responsible Investment (PRI)rose substantially throughout 2020 and 2021 butmade a steep decline in 2022,which continued into 2023.While some may argue thatthe rate of growth was bound to slow eventually,as there were more than 2,000 GPsignatories at the end of 2021,we know of more than 20,000 investors that have raiseda private fund in the time that PRI has existed,so there is still a considerable populationof non-signatories that could have become signatories.New GP PRI signatories by quarter18016014012010080604020Q1Q2 Q3Q4Q1 Q2 Q3Q4 Q1Q2Q3Q4Q1 Q2 Q3Q4Q1Q2Q3Q4Q1 Q2 Q3Q4201820192020202120222023Source:PitchBook.Geogra phy:Global.'As of December 31,20232