Avenue Capital Group, led by billionaire Marc Lasry, is looking for a buyer for its impact investing division after the New York State Common Retirement Fund — its anchor investor in the first Sustainable Solutions Fund — chose not to back a second fund, according to a report by Bloomberg.
The report cites unnamed sources familiar with the matter as confirming that the $12.2bn firm, which manages over $400m in the Sustainable Solutions Fund, had hoped to raise a comparable amount for a follow-up fund. Approximately $300m of the initial fund’s capital came from New York’s public pension fund, which invested in 2020. However, the pension fund decided against participating in a second fund, reportedly due to high staff turnover within Avenue’s impact team.
If a buyer is not found, Avenue may consider winding down the fund and potentially dismissing employees. Notable exits from the team include former key portfolio managers Peter Pulkkinen and Rhys Marsh, both now with Lombard Odier Investment Managers, while recent additions include Sean Coleman from FS Investments. John Larkin, Head of Impact Investments, has remained with the fund.
Avenue’s Sustainable Solutions Fund, which won an award in 2023 for its sustainability efforts, has focused on private-credit investments in companies that aim to deliver both financial returns and positive environmental and social impacts. Portfolio investments include firms developing wildfire-fighting scooper planes, green cleaning products, and biofuels.
The decision by New York’s pension fund comes amid a broader industry retreat from ESG (Environmental, Social, and Governance) strategies, as some investors raise questions about profitability. Funds focused on renewable energy have faced significant challenges, with the S&P Global Clean Energy Index down 17% in 2024. However, private capital has reportedly achieved higher returns on renewable investments than on traditional energy assets, according to an MSCI analysis earlier this year.
New York State’s pension fund, valued at $270bn, remains committed to sustainable investments, with Comptroller Tom DiNapoli announcing plans to divest from fossil fuel companies like Exxon Mobil.
