The Private Market Revolution: How Pension Funds and Private Equity Could Shape the Green Economy

• Private assets’ appeal: Pension funds invest in private equity due to limited alternatives and shrinking public markets.
• ESG potential: Private markets may revitalise environmental, social, and governance (ESG) investments amid political challenges.
• Global trends: Europe and Asia maintain strong ESG disclosure requirements, driving demand for private asset managers with ESG expertise.
• Energy transition funding: Clean-energy projects thrive in private markets, bypassing public scrutiny and political boycotts.
• Strategic freedom: Active management in private equity offers opportunities for tailored investments in green initiatives.

The increasing focus on private markets is shaping the trajectory of green investments. Pension funds, constrained by the shrinking pool of public equities, have turned to private equity and debt, despite concerns over high fees and exposure to interest rate risks. This shift aligns well with environmental, social, and governance (ESG) objectives, which are becoming more challenging in public markets due to political backlash, particularly in the United States.

Private markets provide a sanctuary for clean-energy projects and sustainable technologies. In Europe and Asia, where ESG standards remain robust, private asset managers are expected to play a crucial role in financing the energy transition. For US institutions, private markets offer a way to support green initiatives without provoking political boycotts or risking portfolio stability.

This dynamic could significantly impact the green economy, fostering innovation and investment in renewable energy and climate solutions. As public markets face reduced pressure to prioritise ESG, private markets might emerge as the primary driver of sustainable progress.

Where to invest?

Mutual Funds (No Accreditation Required)

1. Parnassus Core Equity Fund (PRBLX)
   • Focus: Large-cap US equities with strong ESG practices.
   • Minimum Investment: $2,000.
2. Calvert Equity Fund (CSIEX)
   • Focus: Companies with positive ESG impact across various sectors.
   • Minimum Investment: $1,000.
3. TIAA-CREF Social Choice Equity Fund (TICRX)
   • Focus: US equities screened for ESG criteria.
   • Minimum Investment: $2,500.
4. Green Century Balanced Fund (GCBLX)
   • Focus: Sustainable companies and government bonds.
   • Minimum Investment: $2,500.
5. Domini Impact Equity Fund (DSEFX)
   • Focus: Companies with strong environmental and social performance.
   • Minimum Investment: $1,000.

ESG ETFs (No Accreditation Required)

1. iShares ESG Aware MSCI USA ETF (ESGU)
   • Focus: Broad exposure to US companies with high ESG ratings.
   • Expense Ratio: 0.15%.
2. Vanguard ESG US Stock ETF (ESGV)
   • Focus: ESG-screened US equities, excluding controversial industries.
   • Expense Ratio: 0.09%.
3. SPDR S&P 500 ESG ETF (EFIV)
   • Focus: S&P 500 companies with strong ESG metrics.
   • Expense Ratio: 0.10%.
4. Nuveen ESG Large-Cap Value ETF (NULV)
   • Focus: Large-cap value stocks with ESG leadership.
   • Expense Ratio: 0.25%.
5. Xtrackers MSCI USA ESG Leaders Equity ETF (USSG)
   • Focus: ESG leaders within the MSCI USA Index.
   • Expense Ratio: 0.10%.

Sustainable Bond Funds

1. PIMCO ESG Income Fund (PEIFX)
   • Focus: Fixed income investments with strong ESG credentials.
   • Minimum Investment: $1,000.
2. Calvert Green Bond Fund (CGAFX)
   • Focus: Green bonds financing renewable energy and environmental projects.
   • Minimum Investment: $1,000.

Key Features

• Low Minimums: These funds are accessible to retail investors, with investment minimums typically between $1,000 and $3,000.
• Liquidity: Most are open-ended, allowing daily trading.
• Transparency: Holdings and ESG metrics are publicly disclosed.

These funds are ideal for those who want to invest in ESG-aligned portfolios without meeting the stringent requirements of private equity or hedge funds.