Sustainability in private markets - Franklin Templeton

Private markets are expected to play a crucial role in achieving a sustainable future. Franklin Templeton Institute explores some of the key challenges investors face when integrating sustainability in private debt, private equity, and real estate.

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... In the current market environment and with a growing shift away from public markets, Franklin Templeton believe alternative asset classes offer strong potential to support investors’ needs for diversification and uncorrelated returns. There is a growing shift in capital allocation from public to private markets, signaling a swing in traditional asset allocation percentages. 

This paper digs into how to measure and manage the impact that environmental, social and governance (ESG) factors can have on the value of these securities.

Franklin Templeton believe sustainability issues should be considered alongside traditional financial measures to provide a more comprehensive view of the value, risk and return potential of an investment.

In this paper, they examine three very different assets within private markets - real estate, private equity and private credit. Starting with a foundation by Preqin, they explain how ESG factors are now mainstream, but there are still challenges ahead for private market investors that all stakeholders need to work on together to solve.

They expand on that by diving deeper into the challenges each asset class faces, as well as the data availability issue.

Four of their specialist investment managers, Benefit Street Partners (BSP), Franklin Templeton Global Private Equity, Clarion Partners and Franklin Real Assets Advisors, give an inside look at how they integrated ESG analysis in their investment process.

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