PEI 300: The pulling power of impact

Profit-with-purpose has made a mark in the past year, despite recent negative headlines.

Impact investing has taken a reputational hit in recent months. The college admissions scandal that has enveloped Bill McGlashan, former chief executive of TPG’s impact vehicle Rise Fund, has given fuel to critics who accuse managers of “greenwashing”, making exaggerated claims about their social or environmental credentials. And there is a dwindling but still influential band who believe returns and purpose do not go together.

The longer term trends, however, are only going one way. In April, a report by the Global Impact Investing Network put impact assets under management at $502 billion at end-December 2018. The non-profit identified 1,300 impact investors globally across private equity, venture capital, fixed income, real asset and public equities.

The same month, a presentation by StepStone Group’s European head David Jeffrey at Invest Europe’s Investors’ Forum in Geneva noted that impact funds targeted over $22 billion in 2018, up from $18 billion in the previous year, with for-profit managers comprising the majority of those.

“Increasingly, we are finding private placement memorandums with ‘sustainable’, ‘responsible’ and ‘impact’ written all over them,” Jeffrey said.

Last month, Blackstone (1) became the latest big name to get into the game. Sitting within its secondaries unit Strategic Partners, its new impact platform will make direct investments and co-investments alongside existing impact managers, making use of the secondaries unit’s huge number of GP relationships. The strategy will be led by Tanya Barnes from Goldman Sachs.

KKR (3) has been in market since August with its Global Impact Fund, while Partners Group’s (21) PG LIFE, a cross-asset fund targeting private equity, real estate, debt and infrastructure, is seeking $1 billion, part of the €16 billion of capital the group expects to raise in 2019. Hamilton Lane (101) had raised $7.5 million for its debut impact fund by October.

While the big firms will take the headlines, a couple of new entrants in this section of the PEI 300 demonstrate the broader success that purpose-driven private equity has achieved in the past 12 months.

Milan-headquartered Ambienta (281) has raised $1.3 billion over the past five years to invest in companies driven by environmental trends. The firm hit a €635 million final close on Ambienta III in May 2018, exceeding its target of €500 million, in a fundraise that PEI described at the time as “considerably oversubscribed”.

The firm takes control or minority positions of between €30 million and €100 million in European businesses that focus on resource efficiency and pollution control. This need for more industries to have greener and more sustainable practices is a $2 trillion opportunity, the firm believes.

Also making an entrance is the private equity arm of Thrivent Financial (273), a not-for-profit, membership-based financial services organisation based in Minneapolis. Founded by the Lutheran Church but now open to any denomination, the firm raised $1.3 billion for private equity in the past five years including a 2017-vintage, $400 million fund of funds and a $225 million growth equity/VC fund of the same vintage. The parent and its members give more than $200 million to charity.