Managers of climate funds expect a stronger exit environment in 2025, according to CREO, a syndicate of family offices and foundations with an interest in combating the climate crisis.
The 2025 CREO Climate Investment Survey gathered responses from 127 climate fund managers with an aggregate AUM of $994 billion. Survey respondents were primarily headquartered in North America and Europe.
Early-stage venture managers were most heavily represented, with 46 percent of respondents focused on this space. Venture and growth equity respondents were slightly overrepresented relative to the overall climate fund landscape, and infrastructure and real assets managers were slightly underrepresented, according to CREO.
The survey shows a relatively widespread optimism that the exit outlook for climate funds will brighten over the rest of the year. A slight majority (51 percent) expect the exit environment to improve, while just seven percent foresee it worsening.
Managers are also feeling better about exit valuations. Forty-six percent expect an increase in exit valuations compared to 33 percent in last year’s survey, while only 7 percent anticipate valuations will decrease over the next 12 months.
The previous two years have been disappointing. Fifty-one percent of those surveyed said exit valuations decreased in 2024. Still, that was an improvement from 2023, when 78 percent reported decreased valuations.
While managers are positive, it should be noted that such bullishness has been misguided in the past. “When we carried out our previous survey last year, there was a strong expression of an improving outlook coming into the year [2024], and it turned out to be worse than managers expected,” Owen Loudon, managing director for EMEA and India at CREO, tells affiliate title New Private Markets.
In the prior year’s survey, 43 percent of those surveyed expected an improvement from 2023 to 2024. Fast forward a year and about half of the respondents said the 2024 exit environment turned out to be worse than they anticipated.
“We’re again seeing sentiment improving for 2025. What might support that in terms of actually coming true this year is that valuation expectations are leveling more, coupled with pressure on funds to distribute to LPs,” Loudon says.
CREO Americas managing director Jonathan Mi adds: “The sample set leans more heavily towards venture – as you would expect it’s representative of the climate fund space – and venture folks tend to have a bit more optimism.”
While the market may pick up, managers are also increasingly looking for ways to exit distressed assets. “There is just a lot of consolidation, a lot of people getting out of distressed positions, there are roll-ups,” says Mi. “That’s maybe not a great financial return for investors, but that is an exit path that we’re seeing increasingly used.”
Secondaries
Fifteen percent of respondents received secondary offers in 2024, which were most often at a discount to NAV of between 11 percent and 25 percent. Only four managers reported actually completing a transaction. One growth equity and one early-stage venture manager sold in the 0-10 percent discount range. Two other managers (one VC and one real asset manager) sold at a discount of between 26 percent and 50 percent, CREO reports.
Examples of secondaries deals in the climate space are rare, but not unheard of. Blue Earth Capital and North Sky Capital have both backed secondaries transactions involving multiple climate VC assets. In the buyout space, Summa Equity completed a €550 million Article 9 single-asset continuation fund for waste management company NG Group in 2023. More recently, Ambienta closed a continuation vehicle for water management solutions company Wateralia in December.
“We see very few climate-focused secondaries products,” says Loudon. “We see interest from families in deploying into that. It’s a limited sample set, but what we have seen looks to be broadly in line or a little bit ahead of the wider market for secondaries in growth equity and venture.”
Says Mi: “As you see more stress at the fund level, you would expect to see more secondary activity.”
Managers of climate funds expect a stronger exit environment in 2025, according to CREO, a syndicate of family offices and foundations with an interest in combating the climate crisis.
The 2025 CREO Climate Investment Survey gathered responses from 127 climate fund managers with an aggregate AUM of $994 billion. Survey respondents were primarily headquartered in North America and Europe.
Early-stage venture managers were most heavily represented, with 46 percent of respondents focused on this space. Venture and growth equity respondents were slightly overrepresented relative to the overall climate fund landscape, and infrastructure and real assets managers were slightly underrepresented, according to CREO.
The survey shows a relatively widespread optimism that the exit outlook for climate funds will brighten over the rest of the year. A slight majority (51 percent) expect the exit environment to improve, while just seven percent foresee it worsening.
Managers are also feeling better about exit valuations. Forty-six percent expect an increase in exit valuations compared to 33 percent in last year’s survey, while only 7 percent anticipate valuations will decrease over the next 12 months.
The previous two years have been disappointing. Fifty-one percent of those surveyed said exit valuations decreased in 2024. Still, that was an improvement from 2023, when 78 percent reported decreased valuations.
While managers are positive, it should be noted that such bullishness has been misguided in the past. “When we carried out our previous survey last year, there was a strong expression of an improving outlook coming into the year [2024], and it turned out to be worse than managers expected,” Owen Loudon, managing director for EMEA and India at CREO, tells affiliate title New Private Markets.
In the prior year’s survey, 43 percent of those surveyed expected an improvement from 2023 to 2024. Fast forward a year and about half of the respondents said the 2024 exit environment turned out to be worse than they anticipated.
“We’re again seeing sentiment improving for 2025. What might support that in terms of actually coming true this year is that valuation expectations are leveling more, coupled with pressure on funds to distribute to LPs,” Loudon says.
CREO Americas managing director Jonathan Mi adds: “The sample set leans more heavily towards venture – as you would expect it’s representative of the climate fund space – and venture folks tend to have a bit more optimism.”
While the market may pick up, managers are also increasingly looking for ways to exit distressed assets. “There is just a lot of consolidation, a lot of people getting out of distressed positions, there are roll-ups,” says Mi. “That’s maybe not a great financial return for investors, but that is an exit path that we’re seeing increasingly used.”
Secondaries
Fifteen percent of respondents received secondary offers in 2024, which were most often at a discount to NAV of between 11 percent and 25 percent. Only four managers reported actually completing a transaction. One growth equity and one early-stage venture manager sold in the 0-10 percent discount range. Two other managers (one VC and one real asset manager) sold at a discount of between 26 percent and 50 percent, CREO reports.
Examples of secondaries deals in the climate space are rare, but not unheard of. Blue Earth Capital and North Sky Capital have both backed secondaries transactions involving multiple climate VC assets. In the buyout space, Summa Equity completed a €550 million Article 9 single-asset continuation fund for waste management company NG Group in 2023. More recently, Ambienta closed a continuation vehicle for water management solutions company Wateralia in December.
“We see very few climate-focused secondaries products,” says Loudon. “We see interest from families in deploying into that. It’s a limited sample set, but what we have seen looks to be broadly in line or a little bit ahead of the wider market for secondaries in growth equity and venture.”
Says Mi: “As you see more stress at the fund level, you would expect to see more secondary activity.”
