The integration of sustainability into alternative investment fund of funds

Abstract

The growing concern over the consequences of environmental, social, and governance (ESG) issues has increased the demand for sustainable investments (Friede et al., 2015). Simultaneously, the demand for private asset investments has increased. The demand for sustainable and alternative investments has led to an increase in private asset offerings where asset managers provide opportunities to invest into, e.g., private equity, private debt, and infrastructure.

The study aims to contribute to understanding on how sustainability strategy is integrated into private markets fund of funds. This study will look at private equity, private debt, and infrastructure fund of funds.

Five expert interviews were conducted for this study. Three of the interviewees are alternative investment fund portfolio managers – one for each category. The fourth interviewee is an expert and team leader in the private markets industry, and the fifth interviewee is an expert and team leader in sustainability.

This study provides insight into the various systems that are put into place to encourage sustainability within alternative investments. There has been little research on sustainability topics regarding private equity (Mirza et al., 2023). The findings gathered from the interviews support previous literature on the systems used by, e.g., private equity funds to ensure the integration of sustainability. This study finds that PE, PD, and infrastructure fund of funds utilise similar systems to ensure the alignment of sustainable values and their integration with the general partners