European private equity registers new first-half investment record as firms plan to increase focus on environmental and social impact

  • Private equity invests €57bn in H1 2021, a new half-year record
  • Over 95% of private equity firms intend to focus more on ESG in the near future

Invest Europe, the association representing Europe’s private equity, venture capital, and infrastructure sectors, as well as their investors, today published two reports underlining the robust recovery in private equity activity in the first half of 2021, as well as the strengthening belief in the industry’s ability to contribute to a stronger economy and better society.

Investing in Europe: Private Equity Activity H1 2021’ provides a detailed snapshot of private equity activity in Europe and reveals that firms invested €57.3 billion in businesses across Europe, the highest ever six-month total. The record was fueled by a strong rise in venture capital investment to €10.2 billion, a 58% increase on the previous six-month record registered in the second half of 2020. Growth investments also hit a new high, more than doubling to €17.5 billion, highlighting the industry’s focus on innovative, fast-growing businesses that are laying the groundwork for a better tomorrow.

The data shows strong first half fundraising of €52.4 billion, as long-term investors, such as insurers and pension funds, continue to target private equity in search of better returns for European savers. A record 365 funds completed fundraising during the first six months of the year, an all-time high for any H1 period. At the same time, divestment increased by 63% over the same period last year as firms successfully exited businesses via public market listings and competitive sales processes.

‘The insight: how Europe’s private equity industry is anchoring long-term investors – Pan-European market sentiment survey’, conducted and published in partnership with consultancy Arthur D. Little, reflects the momentum in private equity activity in the first half of the year and maps the role the industry is poised to play in the near term. Over two-thirds of fund managers see stronger investment opportunities in the coming year compared to the previous 12 months, and almost 60% of investors expect increased allocations to private equity over the coming three years.

As the outlook improves, the industry is concentrating ever more attention on delivering higher sustainability standards and more ethical practices. Some 95% of general partners stated they intend to increase their focus on Environmental, Social, and Governance (ESG) issues in the near future, and 86% are planning to concentrate more on diversity & inclusion. The survey also found that while COVID-19 had a negative impact on the funds of some four in ten managers, 83% of them responded that it also had a positive impact on their portfolio companies.

The theme of greater social and environmental responsibility runs throughout the survey, with 46% of investors expecting to increase allocations to impact funds over the coming 12 months.

Eric de Montgolfier, CEO of Invest Europe, commented: “Record investment levels and increased confidence in the outlook indicate that European private equity has adapted to the challenges of COVID-19 and is moving past the pandemic. At the same time, private equity is evolving as managers and investors focus even more attention on ESG, diversity and inclusion. This is an industry that recognises its role as a cornerstone of the European economy and wants to be at the forefront of the recovery, as well as the trends that matter to society.”

Invest Europe and ADL will be hosting a webinar on the survey from 1700 to 1730 CET on 17 November 2021. To register, please visit this page.

Both Invest Europe’s Private Equity H1 2021 report and Private Equity Sentiment Survey can be accessed here.