[0] https://kb.parallels.com/125561 "To run a macOS Monterey VM on Mac computers with Apple M1 chips, Parallels Desktop 17 uses new technology introduced in macOS Monterey, that's why it is not possible to run earlier versions of macOS on a Mac with Apple M1 chips."
Those earlier macOS versions don't have the frameworks to run virtualisation with. There are some hacks (mackintosh-ish) that allow you to run very old Intel releases on non-ARM releases, those virtualise the CPU but emulate nearly everything else.
https://mac.getutm.app/