The shift to sustainable portfolios and impact investing reflects growing public concern about global challenges such as climate change, plastics pollution, deforestation, social inequality or access to water. KKR is fund-raising for a $1 billion Global Impact Fund, with India as a key in­vestment destination. Please read and agree to the Privacy Policy. Usman Akhtar leads ... Impact investing, which dedicates capital to companies that generate social or environmental bene- Impact investing is one of the fastest growing investment strategies in the private equity industry. Impact Investing in Private Equity. Impact Capital Managers, a new member association for private capital fund managers in the US and Canada investing for financial returns and impact, now serves as … Sophisticated inves­tors such as TPG Rise and LeapFrog have developed their own measures of impact, based on a single indicator. TPG Rise’s Impact Multiple of Money calculates the net posi­tive social and environmental impact created by a company’s products in 30 areas aligned with the UN’s Sustainable Development Goals. We work with ambitious leaders who want to define the future, not hide from it. Impact investors are typically drawn to private equity investment because it allows them to invest in companies directly. It also announced plans to allocate 10% of its funds to socially and environmentally responsible investments. In most markets, “impact investing” is a small subset of the private equity asset class; in Africa, impact is of critical importance to all private equity investors. Impact investments can be made in either emerging or developed markets, and depending on the goals of the investors, can "target a range of returns from below-market to above-market rates". an increasing worry for climate change, the planet’s limited resources, social inequality and many other negative environmental and societal phenomena. In that time, impact-investing funds have amassed more than $77 billion in assets under management, 1 While investments in private equity funds provide potential for attractive returns, access to opportunities not available in the public markets and diversification, they also present significant risks including illiquidity, long-term time horizons, loss of capital and significant execution and operating risks that are not typically present in public equity markets. By continuing to browse this site, you consent to the use of cookies. As a result, investors may be able to have a direct influence on company decisions by working to align activities with their impact goals, as well as contributing their own operational expertise to help a business succeed. In 2017, Japan’s Government Pension Investment Fund, the world’s largest pension fund, with $1.5 trillion in assets under management, required its fund managers to incorporate environmental, social and governance factors into investment practice and to become PRI signatories. ... Arable land is disappearing from the globe at a catastrophic rate. Impact investors are typically drawn to private equity investment because it allows them to invest in companies directly. Some of the world’s largest private equity funds are selling as­sets that do not meet environmental or social investing guidelines. Impact investment is not a new sub asset class of private equity; but rather a number of private equity funds are describing themselves as impact funds. LeapFrog subsequently closed a second fund of $400 million and is now raising a third fund. The information provided on this website has been obtained or derived from sources that are believed by the relevant author to be reliable, but Glenmede does not guarantee the accuracy or timeliness of such information or sources, and the information provided is not a complete summary or statement of all available information. We worked with the client to source, diligence, recommend and manage a pool of strategies dedicated to direct impact investments within private equity, private debt and real assets. The fund also invests in capability building, to address long-term challenges affecting Singapore and the region. Some of the world’s largest PE funds are also selling as­sets that do not meet environmental or social investing guidelines. The idea that investors can improve society while seeking solid returns is rapidly gaining ground. In Southeast Asia, Khazanah and Temasek are among the leaders in ESG investing. More data on financial returns of impact investments are available in the 2015 Introducing the Impact Investing Benchmark study, which looks at financial performance of private equity and venture capital impact investments, as well as the second report in the financial performance series, published in May 2017, The Financial Performance of Real Assets Impact Investments. The Asia-based investment team assists value creation by providing portfolio companies with deep operational and management experience. Links to any third-party site contained on this website do not represent Glenmede’s endorsement of that site or any material on that site, and Glenmede is not affiliated with the entities that provide such third-party sites (unless otherwise disclosed). According to the Global Impact Investment Network, 67% of impact investors surveyed in 2018 invested in private equity, accounting for 22% of their total assets under management. Nearly 80% of global investors say they focus more on sustainability now than they did five years before. Kiki Yang coleads Bain & Company’s Asia-Pacific Private Equity practice and is based in the Hong Kong office. View All Insights by Team Alternative investments are speculative and include a high degree of risk. Impact investment is all about engineering social or environmental change, as well as generating financial return. Our Impact investment team is supported by the Impact Executive Advisory Board who work with portfolio companies to facilitate growth plans. Global Head Ventures Equity . LeapFrog breaks impact investing record, with US$700mn emerging markets fund. While pressure is growing on fund managers to pay greater attention to environmental and social is­sues, many also realize that ESG and impact investing can generate strong financial returns. The majority of impact investments made in private markets use financial instruments common in angel investing and venture capital such as ordinary and preferred equity or convertible debt. It is spreading rapidly. The positive social impact effected by African private equity is substantial. Of course, these companies tend to be smaller and funds hold them longer, which affects their absolute returns and internal rate of return (IRR). TPG Growth’s Rise Fund invests in healthcare, education, and financial inclusion as well as food and agriculture, technology, and growth infrastructure as secondary sectors. With an estimated $30 trillion of wealth expected to change hands from baby boomers to millennials in the next 30 years, the stakes for investors are huge. We employ a broad range of impact investing strategies, seeking to finance long-term, market-driven solutions to real societal challenges. Laura Kreutzer . … Fund managers keen to adopt an ESG focus often feel confused about the right approach. Looking at a dozen impact-investing funds that publicly disclose how they measure impact, we found that a majority employ more than one impact-measurement framework. Home Blog Impact investing: private equity’s unsung hero. Private equity and venture capital investment helps create more successful businesses with stronger, more sustainable futures. Impact investing is an exciting step in the evolution of responsible investing. And there is an increased demand for good investments, that can meet the expectations of a mainstream market. Impact investing is already mainstream in private equity . Several indicators suggest environmental, social and governance (ESG) investing is going mainstream. The United Nations’ Sustainable Development Goals provides a framework with 17 clearly defined objectives, which can help funds focus on tangible ESG goals. An important first step is ensuring the leadership team aligns on a vision for environmental and social impact, and on balancing ESG goals with financial returns. Kunal Shah. TPG’s $2 billion Rise Fund 1 was the largest pool of capital dedicated to social and environmental impact when it closed in 2017. Through private equity, impact investors can shape portfolio companies’ strategies and work directly with companies to help them meet the intended impact. As public concern about the environment and social issues grows, private equity funds are starting to act—to mitigate risks to their finances and reputations and to build sustainable portfolios. They typically exclude investments in a number of countries, sectors or companies, and some help their portfolio companies with ESG-related work. About 90% of the Asia-Pacific GPs we surveyed have accelerated their effort to invest sustainably over the past three to five years. Pressure is growing on fund managers to incorporate environmental and social issues in their investment decisions. Impact investing, which dedicates capital to companies that generate social or environmental bene­fits, also is on the rise and attracting a growing number of PE funds. In addition, industry observers say that more private capital is needed to achieve the United Nations’ ambitious Sustainable Development Goals, which require $3.9 trillion a year through 2030. That said, industry-specific ESG benchmarking standards are starting to emerge, including business impact analysis and the Global Impact Investing Ratings System. In addition to education, private equity impact investments can be made in a variety of other sectors. Greater transparency and ESG focus in company reports is helping fuel the ethical investing trend. One avenue is impact investing, directing capital to enterprises that generate social or environmental benefitsin projects from affordable housing to sustainable timberland and eye-care clinicsthat traditional business models often sidestep. Bain uses cookies to improve functionality and performance of this site. While most talk revolves around equity… The go-to source for impact investing news and trends. It’s also known as social investing, or 3D investing, and a company’s positive impact is just as important to backers as its risk profile and potential return. Private equity firms managing funds aimed at generating both financial returns and environmental, social and governance benefits can expect some positive, albeit modest, changes from President-elect Joe Biden, experts say. Jean-Michel Severino succeeded Patrice Hoppenot in May 2011 as CEO of "Investisseurs et Partenaires" (I&P), an impact investing and private equity firm, which focuses on small and medium-sized enterprises and microfinance institutions in Africa. Such debt funds account for one-third of impact investor assets under management, making them the largest asset class in impact investing. We combine operational and ESG know-how, financial expertise and a relationship-driven approach to all … On the growth of private equity impact investment – Private Equity International (PEI)'s keynote interview with Tania Carnegie, Leader and Chief Catalyst, Impact Ventures, KPMG. Sustainability & Corporate Responsibility. In the coming years, we expect more GPs to incorporate ESG and impact considerations into their strategies. Bain’s Global Sustainability Innovation Center launches in Singapore to support organizations in accelerating economic growth while making the planet a better place. New publications track social and responsible investing, and the media eagerly depict large and small investors helping to make the world a better place. Private equity's contribution. Impact investment is an investment strategy which explicitly combines the objectives of financial returns as well as social good. Overall, impact investing still represents a small share of total fund-raising, but it is growing, and Asia-Pacific has an important share of the pie. Though it is still too early to see a return track record, the fund has several successful exits, such as Bima, a microinsurance busi­ness that it exited through a trade sale to Allianz in 2018. Beyond the buzz, a wealth of data corroborates the trend. Until recently, this investment approach was largely confined to private equity. It is too early to know if private equity impact deals can consistently generate returns that match investors’ expectations. He is based in the Munich office. What used to be the terrain of core impact investors like Bamboo Capital Partners or LeapFrog Investments now is luring some of the largest PE funds, including TPG, KKR and Bain Capital. Impact investing is currently one of the fastest growing investment strategies in the private equity industry The growth is being sparked by. Monday November 23, 2020 11:52 am. Many private equity (PE) funds are incorporating environmental, social and governance (ESG) goals into their strategies, and public interest in ethical investing has taken off. This is especially true because these tend to be long-term investments. Finally, funds need to choose reliable measures to evaluate their environmental and social impact. In many ways, private equity is ideally suited to the world of impact. For example, impact investing pioneer LeapFrog Investments focuses on financial inclusion and healthcare in Asia and Africa. To measure results, however, no single approach works for all funds. To the extent specific securities or investments are mentioned, they have been selected by the individual authors on an objective basis to provide examples or illustrate views expressed in the commentary and may or may not represent securities or investments purchased, sold or recommended for Glenmede advisory clients or others. Nearly ten years have passed since a coalition of philanthropists and investors introduced the financial-services industry to impact investing, a practice distinguished by its aim to generate social and environmental benefits alongside financial returns. Impact funds operate mostly in the venture capital and expansion and growth stages of financing. However, a growing number of studies are disproving it. Additional, over the past five years, assets under management allocated to impact-oriented private equity have climbed roughly 19%, according to the World Bank. A few cloud service providers are singlehandedly reshaping the industry. By. Usman Akhtar leads Bain’s Southeast Asia Private Equity practice and is based in Jakarta. This asset class offers investors an accessible way to generate a positive social and/or environmental impact alongside attractive and stable long-term financial returns. Vital Capital Fund . The group develops recommendations for clear and consistent disclo­sure and enables companies to more effectively measure and evaluate their own risks and those of suppliers and competitors. Rik Vyverman. June 2020, kl. During due diligence, it assesses a company’s ESG track record and includes environmental and social impact in its 100-day post-invest­ment plan. Impact investing differs from socially responsible investing, which is the process of selecting or eliminating investments based on screening criteria. It is spreading rapidly. A review of more than 2,000 studies showed a strong correlation between the performance of environmental, social and governance funds and positive investment returns. Impact Investing A sense of purpose Can money make a difference? Please allow 24 hours for us to process your request. ImpactAssets 50: A Global Landscape of Impact Investment Fund Managers The ImpactAssets 50 (IA 50) is the first open-source, publicly published database of experienced private debt and equity impact investment fund managers. Impact funds were mi­croscopic in size and positioned on the margin of the industry. A fund’s investment thesis will determine the instruments used, ticket size, ownership stake and if board access is required (usually so). The interest in nordic private equity investments in impact is great. About Us. “Investment by private equity has exploded over the last decade,” Angela said, adding that investment activity even picked up in Q3 and Q4 of 2020 after being slowed by the pandemic, and it is poised to remain strong in 2021. Impact investing is one of the strategies that allow us, as a private foundation, to better integrate our various financial assets to have a greater impact. Private equity is one of several asset classes open to investors and is termed an “alternative investment.” Private equity involves ownership shares in an entity that is not publicly listed or traded. LeapFrog’s Financial, Impact, Innovation and Risk Management framework inte­grates financial and operational performance indicators and governance indices benchmarked to global best-practice standards. LeapFrog Investments has announced the largest-ever private equity fund by a dedicated impact fund manager, surging past its US$600mn target to reach US$700mn. Today, LeapFrog focuses primarily on fi­nancial services and healthcare in Asia and Africa and typically invests $10 million to $50 million. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending on investors' strategic goals. The same number of funds plan to increase their effort and focus on sustainability in the next three to five years. Copyright © Impactivate® ALL RIGHTS RESERVED, Private Equity in the Education Sector Shows Growth, Private Equity Supports Healthcare in Emerging Markets, Project Sage Report Finds Over $1 Billion in Private Gender Lens Investing Funds, Israeli Startups: How Some Investors Seek to Support Israel through Private Equity Investments. For instance, many education investments aim to lower the cost of schooling, but achieving that goal might limit the investments’ financial returns. Impact investing was once the domain of nuns and other faith-based investors. Impact is Everywhere. Singapore’s Temasek pledged in 2014 to advance the sustainability agenda through its Ecosperity platform. Temasek now takes di­rect stakes in impact funds and companies. The $82 trillion in assets under management by these signatories increased by a compound annual rate of 19% in the same period. The latest private-equity giant to move into impact investing has launched fundraising for what it expects to be a $1 billion Global Impact Fund with 12-15 investments in sustainable business development, next-generation energy, agriculture and food and other sectors aligned with the UN Sustainable Development Goals. The criteria are likely to be different for ESG risk mitigators, ESG op­portunity seekers and impact investors. 85% of the restructured portfolio was dedicated to market-rate mission-related investments, with up to 15% exposure to high impact, below-market mission-driven investments. Private equity funds typically have a 10-15 year term and … Interestingly, the median multiple on invested capital was 3.4 for deals with social and environmental impact, compared with 2.5 for other deals. Category: Social issues. Thank you for subscribing! Richard Georg Engström entrepreneur and advisor in impact investing 24. £5m - £10m investment. The assets under management by impact investors have already surpassed $ 500 billion in a short period of time. impact investing Private Equity Strategies sustainable investing strategies. Until recently, this investment approach was largely confined to private equity. Impact investors are typically drawn to private equity investment because it allows them to invest in companies directly. A few progressive governments and groups have begun pursuing legal ac­tion against companies that flout good ESG practices. Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. We took a sample of about 450 PE-led exits conducted in the past five years in the Asia-Pacific region and isolated those that either involved impact funds or focused on sectors that score high on ESG, including clean tech, ecology, renewables, education, waste or water. Dedicated impact funds still represent a small minority of total private equity investors. Read More » Investisseurs & Partenaires. Impact investing assets under management have grown at an over 60 % yearly rate in 2013-2018. Impact Investing in Private Equity Impact investors are typically drawn to private equity investment because it allows them to invest in companies directly. Private equity firms like Bain Capital and TPG have been developing investments in projects that seek to do social good and bring the company positive returns in finance. Impact Engine Private Equity invests in lower middle market, growth-stage companies that generate strong financial returns and positive outcomes in economic empowerment, education, environmental sustainability, or health. Impact investing organisations and funds also make equity investments like traditional private equity and venture capital funds, but only investments with developmental impact. Our research shows that only 13% of Asia-Pacific GPs say they have fully in­tegrated ESG considerations at the investment committee level or take concrete actions to improve the ESG performance of their portfolio (see Figure 2). By Kiki Yang, Usman Akhtar, Johanne Dessard and Axel Seemann. Growing SMEs through Technical Assistance Facilities in Emerging Markets Buyout. Impact i… In addition, as further described in the Terms of Use, any security or other investment mentioned on this website should not be considered a recommendation to buy or sell that security or other investment. In response, global and Asian GPs are scrambling to demonstrate that they comply with ESG guide­lines and that they are doing more deals that advance ESG principles.