Private markets have played a major role in Europe's energy transition, argues Bos, by channelling private money to energy projects that have a concrete impact. Investors can also contribute to these and other sustainable transitions through private debt or private equity in emerging countries. Triodos Investment Management (Triodos IM) is active on private markets through different strategies and has a portfolio in private debt and equity of around EUR 2 billion.  

Private markets are ideally suited for impact investing. They are generally less volatile and less sensitive to investor sentiment than listed markets and offer good diversification opportunities and clear impact returns. Bos: “They are also generally characterised by stable long-term returns. I can show you lovely, consistent upward trends for our financial inclusion funds, even in emerging countries where many investors consider the stock markets to be too risky. Another important aspect is that as an investor we have more direct influence on a private company than in the case of a listed company. This allows us to steer more on both financial and impact performance.”

Headwinds, but recovery in emerging markets

Although private markets are less volatile, just like listed stocks and bonds they remain subject to risks such as high debt burdens, lower economic growth, geopolitical turmoil and extreme weather conditions.

In 2024, the global economy showed better-than-expected growth and inflation but was still below the historical average. And there were considerable regional differences. “Private markets in Europe generally performed reasonably well, although the valuation of renewable energy projects lagged behind due to lower energy prices,” says Bos.

It was more challenging in emerging markets. There has been some recovery, Bos argues. “With the right policy choices, these markets can transform structurally. Important game changers such as digitisation could serve as catalysts.”

Energy transition: More focus on innovation

As part of the sustainable transition, Triodos IM has shifted the focus, placing less emphasis on financing sustainable energy projects such as wind farms, and more on scaling up new technologies and addressing grid congestion.

This has to do with reaching a tipping point, Bos explains. “In the Netherlands, more than 50% of our energy is generated sustainably. Wind and solar farms are now so successful that they cannot always supply all their energy to the grid. The problem of grid congestion can be solved with batteries and other smart technology.”

Private markets are well suited to such investments. The pioneers in sustainable innovation are often smaller companies that have not yet taken the step to a stock exchange listing. “We’re looking at smaller green hydrogen projects in Europe, for example, rather than the large-scale ones with billions in investments, and aim to do our first investment in 2025.” says Bos.

Emerging markets face a sustainability challenge

Bos expresses her concerns about emerging countries in 2025. “We have started to see improved sentiment and more capital inflows. In many emerging countries, the energy transition has only just begun. If the US starts pumping a lot more oil during Trump’s presidency, some of these countries may start to notice. They are already getting hardest hit by climate change but lack the resources to do something about it because of high debt burdens. Support from rich, developed countries unfortunately remains insufficient, as evidenced by the last-minute agreements at COP29. Private markets will have to help fill that gap.”

Triodos Investment Management has a track record of more than 25 years in financial inclusion and is active in over 40 different countries. “Microcredit and loans to local small and medium-sized companies remain important in the fight against poverty, but we see it increasingly combined with loans for climate solutions and the growing need for clean water and sanitation. We expect great things from this combination for 2025."

Bos stresses the importance of these local projects: “In countries like India, we support smallholder farmers by promoting sustainable agricultural practices. This is not only good for climate adaptation, but it also strengthens local communities.”

Bos acknowledges that emerging countries continue to face economic challenges. “With private debt projects, we look at credit risks as well as the broader macroeconomic context. This requires careful analysis and a strong team. The art of investing is to align those factors.”

Dramatic loss of biodiversity

Bos: “Climate change is hugely impactful, but the next wave coming our way is the rapid loss of biodiversity. We're facing an ominous tipping point. Investors can make a difference here too, especially in private equity, where they can exert influence as a shareholder. We are investigating the possibilities for a nature-based solutions (NBS) fund, to preserve and strengthen biodiversity.”

Biodiversity loss has certainly received attention in the institutional market but is still in its infancy in terms of investment policy. Biodiversity will be an important theme in 2025, Bos confirms. “Triodos Bank, including Triodos IM, has committed to invest at least EUR 500 million in nature-based solutions by 2030, as part of its biodiversity goals. This will cover areas such as land regeneration in agriculture and nature restoration, but also the establishment of new ecosystems in urban areas.”

An inspiring example: Ocean Rainforest

Bos cites Triodos Food Transition Europe Fund as a successful private equity fund. “The fund is doing well this year, both in terms of valuation and impact.”

An inspiring example in the fund’s portfolio is Ocean Rainforest, a company near the Faroe Islands that grows seaweed. “Seaweed not only contributes to biodiversity in the ocean – and in that sense the company would also be a good fit for an NBS-fund - but is also used for sustainable fertilisers, protein sources and cosmetics. This kind of project connects economy and ecology in a powerful way,” says Bos.

Innovative companies developing sustainability solutions are aware of Triodos IM in private markets through projects such as battery storage, regenerative agriculture and financial inclusion in emerging markets, says Bos. “We play an active role at the forefront of these solutions. That's where we make the biggest difference.”