CHICAGO--(BUSINESS WIRE)--Jun 8, 2026--
S2G Investments today published " The Illusion of Crowds: Capital Concentration and Correlated Risk in Energy Transition Private Markets," which shows that capital across the sector is far more concentrated, and the risk to investors far more correlated, than the number of funds and deals would suggest. The research is a companion to S2G's 2023 report, " The Missing Middle: Capital Imbalances in the Energy Transition."
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Drawing on more than $88 billion in energy transition-focused capital raised by almost 280 venture, growth, private equity, and infrastructure strategies across the United States, Canada, and Europe between 2021 and 2025, the report concludes that what appears to be a broad, well-distributed crowd is, in practice, much narrower. A small set of large funds, outsized rounds, and repeat syndicates accounts for a disproportionate share of the capital deployed.
The concentration is visible at the fund, deal, and syndicate levels. Six early-stage funds, each managing more than $1 billion, held roughly 26% of all early-stage capital raised over the period, while 157 funds of $100 million or less accounted for only about 13%. At the deal level, 57 transactions of $100 million or more represented just 1.7% of early-stage deals but absorbed roughly 45% of early-stage capital. Among the 10 largest early-stage funds, co-investment clustered in rounds that moved the most dollars, accounting for about 41% of the cohort's aggregate deployment.
"Contemporary energy transition-focused private capital markets project the appearance of a wise crowd while exhibiting the empirical behavior of a much more correlated one. The sector has drawn a number of capital-intensive companies that need large checks early, and the funds positioned to back them naturally converge on the same opportunities," said Francis O'Sullivan, Ph.D., Managing Director of S2G's Energy Investment team and co-author of the report. “What is ultimately at stake is the breadth of innovation this transition depends on. A market that channels its largest commitments toward a few flagship companies risks underfunding the wider range of technologies and business models the transition needs, while leaving managers and allocators holding more correlated risk than the headline numbers imply.”
The same dynamic carries over into the growth stage, where the shortage of fit-for-purpose capital identified by S2G's 2023 Missing Middle analysis persists. Roughly three-quarters of the largest growth-stage capital rounds funded companies that were pre-revenue or generating less than $50 million in commercial revenues. Much of this traces to early-stage funds following their winners into later rounds, nominally led by growth investors, so capital marketed as growth has often functioned as very large-scale venture investment. For LPs, a growth allocation can therefore carry venture-stage risk they never expected to hold.
"For asset allocators, that diversification needs to be assessed at the portfolio company level, not just the manager level," said Gokul Raghavan, CFA, Principal on S2G's Energy Investment team and co-author of the report. "An LP can hold commitments across several funds and still find itself exposed repeatedly to the same limited set of companies. Manager-level diversification can meaningfully overstate the true diversification of risk, given the overlap in portfolios, and create unknown, compounded risks for those looking to put dollars to work in the sector."
S2G believes the conditions that make private markets effective, a genuine diversity of views and independent judgment, can be rebuilt through more disciplined fund sizing, clearer lines between growth and large-scale venture, and reporting that separates follow-on capital from new underwriting. Done well, the same market can back a broader range of companies driving the energy transition, not just the most visible few.
"The Illusion of Crowds" is available for download here on S2G’s website.
About S2G Investments
S2G Investments is a multi-asset investment firm focused on scaling durable, market-defining businesses across food & agriculture, energy, and oceans. We provide capital and value-added resources to companies commercializing solutions designed to improve efficiency, resilience, and long-term value across industries powering the global economy. Through fit-for-purpose financing and a systems-focused investment approach, S2G is committed to driving measurable, sustained outcomes with tailored solutions that span late-stage venture, growth equity, structured finance, and infrastructure. For more information, visit s2ginvestments.com.
The Illusion of Crowds
