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. Retail investors, especially the millennial generation and women, are increasingly demanding that companies expose ethical issues linked to their investments. We are currently investing from two dedicated funds: Impact. 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. 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. Bookmark content that interests you and it will be saved here for you to read or share later. Vital Capital Fund is a private equity fund with approximately $350 million in assets. Please allow 24 hours for us to process your request. A few progressive governments and groups have begun pursuing legal ac­tion against companies that flout good ESG practices. June 2020, kl. For instance, many education investments aim to lower the cost of schooling, but achieving that goal might limit the investments’ financial returns. AIP Private Markets today announced it has built upon its $800M impact investing platform by closing on a fund which will focus on climate solutions. Kiki Yang coleads Bain & Company’s Asia-Pacific Private Equity practice and is based in the Hong Kong office. Read more . Then trillion-dollar financial giants got in on the game. Permira, a global fund with €7.5 billion under management and an extensive presence in Asia, uses ESG criteria to screen assets and rejects those that are too risky. Greater transparency and ESG focus in company reports is helping fuel the ethical investing trend. However, in recent years, impact investing has evolved and expanded to include listed securities. In that time, impact-investing funds have amassed more than $77 billion in assets under management, 1 LeapFrog Investments began as an impact investment fund providing microinsurance to the poor, helping finance small business investments. We work with ambitious leaders who want to define the future, not hide from it. 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. Impact investing can be a useful complement to other investments in your portfolio. 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. It is spreading rapidly. LeapFrog Labs, a nonprofit R&D hub, helps portfolio firms win grants for innovation investments that are too risky for commercial lenders. LeapFrog breaks impact investing record, with US$700mn emerging markets fund. 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. And one could argue as well that some of these sectors benefit from strong growth. Government-linked investors are not the only ones leading the way. INVESTMENT STRATEGY. 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 Impact investment seems to have ramped up over the past 12 months. Additional, over the past five years, assets under management allocated to impact-oriented private equity have climbed roughly 19%, according to the World Bank. Environmental, social and governance funds fared better than many of their peers at the start of the pandemic. With the fraying contract between society and business an urgent priority, many companies and banks are eager to find investments that generate business and social returns. This is often accomplished through private equity, debt, or fixed-income securities. 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, the number of impact firms is increasing, and no private equity fund can do without an ESG policy. Impact investment is an investment strategy which explicitly combines the objectives of financial returns as well as social good. Like any investor, those focused on impact generally seek a diversified portfolio with investments in a variety of asset classes. New publications track social and responsible investing, and the media eagerly depict large and small investors helping to make the world a better place. 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. The landscape. The assets under management by impact investors have already surpassed $ 500 billion in a short period of time. Singapore’s Temasek pledged in 2014 to advance the sustainability agenda through its Ecosperity platform. Please read and agree to the Privacy Policy. 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. LeapFrog has invest­ed in more than 20 companies and says revenues of its portfolio companies have grown an average of 40% a year since investment, while creating more than 122,000 jobs. Impact Investing in Private Equity. Impact Investing A sense of purpose Can money make a difference? View All Insights by Team Alternative investments are speculative and include a high degree of risk. It is too early to know if private equity impact deals can consistently generate returns that match investors’ expectations. New publications track social and responsible investing, and the media eagerly depict large and small investors helping to make the world a better place. 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. Of 22,000 investors worldwide, 78% said they place more emphasis on sustainability now than they did five years before, according to Schroders 2017 Global Investor Study. Most venture and private equity funds use a limited partnership as their legal structure (Figure 2), which involves two main types of actors: (1) a general partner (GP) and (2) limited partners (LPs). Beyond the buzz, a wealth of data corroborates the trend. Millennials are twice as likely as the overall population to buy products from sustainable companies, according to Morgan Stanley’s Insti­tute for Sustainable Investing. More information can be found in our Privacy Policy. Sign up to receive the Impactivate® newsletter via email. About Us. While most talk revolves around equity… We are an independent private equity firm owned and controlled by our partners. Private Equity Investors Embrace Impact Investing . By. ImpactAlpha, April 17 – Private equity and venture capital often get the glory, but private debt and fixed-income instruments do the heavy lifting in impact investing. We employ a broad range of impact investing strategies, seeking to finance long-term, market-driven solutions to real societal challenges. Several indicators suggest environmental, social and governance (ESG) investing is going mainstream. About 90% of the Asia-Pacific GPs we surveyed have accelerated their effort to invest sustainably over the past three to five years. 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. 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). Impact investing differs from socially responsible investing, which is the process of selecting or eliminating investments based on screening criteria. This is especially true because these tend to be long-term investments. 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. For instance, New Zealand’s NZ Super Fund SWF divested $650 million in fossil-fuel investments in 2017, providing a strong signal to the market and adding momentum to the Global Fossil Fuel Divestment and Clean Ener­gy Investment Movement. 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. 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. A number of governments support greater financial disclosure requirements through, for example, the Taskforce on Climate-Related Fi­nancial Disclosures. Impact investing is one of the fastest growing investment strategies in the private equity industry. LeapFrog breaks impact investing record, with US$700mn emerging markets fund. Private equity has al-ways been on the cusp of investing in We believe this provides the most direct pathway to generating impact outcomes at scale with the deepest and most diversified investment opportunity sets. Sophisticated inves­tors such as TPG Rise and LeapFrog have developed their own measures of impact, based on a single indicator. A new study by Morgan Stanley, which surveyed over 10,000 equity mutual funds over the … KKR Global Impact builds on our track record of investing in solutions and our history of thoughtful management of ESG issues. Private equity investments are considered relatively illiquid and costly to transact, according to the National Bureau of Economic Research. However, a growing number of studies are disproving it. 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. But no one strategy fits all. Impact investors are typically drawn to private equity investment because it allows them to invest in companies directly. Usman Akhtar leads Bain’s Southeast Asia Private Equity practice and is based in Jakarta. The number of fund managers who have signed the United Nations-supported Principles for Responsible Investment (PRI) grew to more than 2,000 in 2018 from 1,200 in 2013. But the findings are an important signal for a market strongly focused on financial profits. 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. Read More » Investisseurs & Partenaires. … Impact investing would seem an unlikely business for avaricious private equity funds. Investing through private equity allows impact investors to directly shape portfolio company strategy and help companies achieve the intended impact. And there is an increased demand for good investments, that can meet the expectations of a mainstream market. Pressure is growing on fund managers to incorporate environmental and social issues in their investment decisions. The $82 trillion in assets under management by these signatories increased by a compound annual rate of 19% in the same period. Kiki Yang coleads Bain & Company’s Asia-Pacific Private Equity practice and is based in the Hong Kong office. It is spreading rapidly. In 2016, the fund set up the Sustainability & Stewardship Group outside the investment group, with the mandate to lead the firm’s efforts in these areas. That said, industry-specific ESG benchmarking standards are starting to emerge, including business impact analysis and the Global Impact Investing Ratings System. an increasing worry for climate change, the planet’s limited resources, social inequality and many other negative environmental and societal phenomena. Some of the world’s largest private equity funds are selling as­sets that do not meet environmental or social investing guidelines. 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 … Impact investors, unlike ESG investors, invest only in assets with significant social and environmental impact. Private Equity News & Analysis Six trends in impact investing From agriculture to zero waste, PEI's A-Z shows how impact has entered the investing mainstream. Each and every day. And 60% of Asian PE funds do not require their portfolio companies to report on ESG issues or responsible investment. Impact investing occurs across asset classes; for example, private equity/venture capital, debt, and fixed income. In addition to education, private equity impact investments can be made in a variety of other sectors. Some work with their portfolio companies to increase their environmental or social impact, and almost all pursue investments in ESG-linked sectors such as renewables, waste manage­ment and education. Impact investing is an exciting step in the evolution of responsible investing. But there are some promising signs. But many are embracing what they see as a new opportunity. Our Impact investment team is supported by the Impact Executive Advisory Board who work with portfolio companies to facilitate growth plans. LeapFrog subsequently closed a second fund of $400 million and is now raising a third fund. Iimpact investing funds have attracted more money than ever before in the past several years, despite a presidential administration that has, in some cases, opposed … Laura Kreutzer . There are also sector-specific challenges to private equity investments. Temasek now takes di­rect stakes in impact funds and companies. Private equity/venture capital Investors - A 2016 Global Impact Investing Network survey found that investors plan to increase the capital committed to impact investments in 2016 to $17.7 billion, a 16% increase from commitments in 2015. Ultimately, greater commitment to environmental and social goals will help private equity funds create financial returns while having a positive impact on the world. 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. 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. 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. Vital Capital Fund . Private equity/venture capital Investors - A 2016 Global Impact Investing Network survey found that investors plan to increase the capital committed to impact investments in 2016 to $17.7 billion, a 16% increase from commitments in 2015. One reason is that investors and the media use the labels—ESG investing, social and responsible investing, and impact investing—interchangeably, blurring the boundaries between different aims. By significantly improving the financial performance of the companies it invests in, private equity plays an important role in Europe's prosperity. 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. The criteria are likely to be different for ESG risk mitigators, ESG op­portunity seekers and impact investors. We’re as close as we’ll ever get to a unified theory of tech investing—and yet, so far. 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. Growing SMEs through Technical Assistance Facilities in Emerging Markets Impact investing organisations and funds also make equity investments like traditional private equity and venture capital funds, but only investments with developmental impact. For the sake of clarity, we distinguish between ESG-focused investors and impact investors as follows (see Figure 3): ESG risk mitigators evaluate ESG compliance and risks during due diligence and ownership, focusing on all or only a subset of ESG issues. However, this effort is still nascent, and some of it is simply lip service, instead of real action. During due diligence, it assesses a company’s ESG track record and includes environmental and social impact in its 100-day post-invest­ment plan. He now works on implementing the. Kunal is Managing Director and Head of Private Equity Solutions at iCapital, focused on the identification, selection and due diligence of private equity funds to be offered on the Flagship Platform. Usman Akhtar leads ... Impact investing, which dedicates capital to companies that generate social or environmental bene- Stay ahead in a rapidly changing world. impact investing Private Equity Strategies sustainable investing strategies. A fund’s investment thesis will determine the instruments used, ticket size, ownership stake and if board access is required (usually so). They ask themselves how they can learn or adapt from what it is that private equity is already do-ing successfully. He is based in the Munich office. Impact investing is currently one of the fastest growing investment strategies in the private equity industry The growth is being sparked by. While the impact investing industry is in an early stage of development, it is poised for growth. 10 May 2019. Bain uses cookies to improve functionality and performance of this site. 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. 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. In the coming years, we expect more GPs to incorporate ESG and impact considerations into their strategies. The combination of long-term investment horizons and hands-on governance mean the asset class can nurture both financial performance and impact in a tangible way. Actis then works with its portfolio companies to strengthen ESG performance, embedding ESG value-creation commitments into 200-day plans. The Asia-based investment team assists value creation by providing portfolio companies with deep operational and management experience. Buyout. The United Nations’ Sustainable Development Goals provides a framework with 17 clearly defined objectives, which can help funds focus on tangible ESG goals. impact investing Private Equity Strategies sustainable investing strategies. 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. Bain’s 2019 Asia-Pacific private equity survey found that 60% of Asia-Pacific-focused general partners (GPs) feel increased pressure from their investors to focus more on ESG. private equity as an example for other parts of the financial services commu-nity considering how to incorporate impact investment as part of their product suite. In Southeast Asia, Khazanah and Temasek are among the leaders in ESG investing. The haze that enveloped Southeast Asia in 2015 increased Temesek’s commitment to work with portfolio companies and partners on environmental issues and social inclusion, giving a strong signal to the market. Impact investment seems to have ramped up over the past 12 months. By continuing to browse this site, you consent to the use of cookies. Home Blog Impact investing: private equity’s unsung hero. Private equity investments are typically funded by high–net-worth individuals, pension funds, and other institutional investors. Impact is Everywhere. This week, as thousands gather for SOCAP17, the world’s largest gathering for the growing marketplace of impact investing, B Lab releases its list of 28 Best for the World Funds. By Kiki Yang, Usman Akhtar, Johanne Dessard and Axel Seemann. Until recently, this investment approach was largely confined to private equity. Just a decade ago, PE investing mostly involved risk-return considerations, where risk assess­ments already included most material ESG risks and return meant only IRR. Of course, these companies tend to be smaller and funds hold them longer, which affects their absolute returns and internal rate of return (IRR). Today, LeapFrog focuses primarily on fi­nancial services and healthcare in Asia and Africa and typically invests $10 million to $50 million. Impact investors are typically drawn to private equity investment because it allows them to invest in companies directly. 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. Impact investing is part of Socially Responsible Investing, but represents the part of it which gives the most importance to social factors, because these are now an explicit investment objective, unlike in other forms of Socially Responsible Investing. Monday November 23, 2020 11:52 am. Geczy, conducted a rigorous survey of 53 impact investing private equity funds from around the world. ... Arable land is disappearing from the globe at a catastrophic rate. Kunal Shah. Should we be sceptical or see private equity’s buy-in as proof of the impact investment concept? At the same time, impact investors in private equity face several challenges. Each and every day. 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. According to Preqin, 55% of Asian LPs still do not have an ESG investing policy for private eq­uity. *I have read the Privacy Policy and agree to its terms. Limited partners (LPs) are now making ESG a priority. A private equity benchmark produced by Cambridge Associates and the Global Impact Investing Network (GIIN) found top quartile returns net of fees and expenses of 9.7% or … They ensure portfolios will be sustainable in the coming decades and can generate top returns. 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. 10 May 2019. The interest in nordic private equity investments in impact is great. Johanne Dessard is practice director in Bain’s Global Private Equity practice and is based in the firm’s Dubai office. Our private markets impact investing programme deploys capital through alternative assets. Even so, a significant portion of their portfolios tends to be in private markets, including private equity investments. Impact funds were mi­croscopic in size and positioned on the margin of the industry. 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. Thank you for subscribing! Impact investing was once the domain of nuns and other faith-based investors. Its due diligence process high­lights gaps in ESG management to be addressed after acquisition. Along with the illiquidity already mentioned, there is no standard framework to measure the social and environmental impact of private equity investments. 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. 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. ESG opportunity seekers look for investment opportunities to support environmental, social or gov­ernance progress. The go-to source for impact investing news and trends. £10m - £30m investment. Emerging-market fund Actis, with $7.8 billion under management, has a dedicated ESG team that seeks opportunities to create long-term and sustainable value. Finally, funds need to choose reliable measures to evaluate their environmental and social impact. A few cloud service providers are singlehandedly reshaping the industry. We aim to invest in the future, eliminate greenwashing, lean into underappreciated or mispriced areas of the market, stay ahead of change, and align portfolios with fundamental long-term economic value. How would you describe that escalation? Subscribe to Bain Insights, our monthly look at the critical issues facing global businesses. Plus, the minimum amount of investment capital tends to require much deeper pockets than conventional public equity. Environmental and social considerations will play a bigger role in investment decisions in the com­ing decade as part of a fundamental societal shift. 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