Impact investing has fully bloomed over the past couple of years, with more than $30 billion invested in 2017, nearly $40 billion expected to have been invested in 2018 and a slew of high-profile private equity firms raising new funds dedicated to the strategy.
With its $2 billion Rise Fund, TPG Growth was an early mover in impact and it has clearly emerged as a leader. “This was the first scale impact effort and importantly, it wasn’t just the size, but the fact that we did it with institutions,” says Bill McGlashan, founder and chief executive of the Rise Fund.
McGlashan and the Rise Fund have been able to achieve some important victories that are now taking impact to the tipping point. Innovation initially began with the clear message that impact shouldn’t and wouldn’t compromise financial returns and that measurement will be paramount to the efforts, hence allowing them to successfully attract institutional investors.
Through the 25 investments from the Rise Fund, which represents $1.8 billion invested and reserved, they have also proven that their model works. “Ultimately, we were telling everybody we were committed to doing it, but now we can say we’ve actually done it,” he says. “We made these investments in great growth companies that are creating very significant social and environmental impact.”
TPG is continuing its journey on the impact road, raising up to $3.5 billion for its follow-up fund, Private Equity International reported in December. McGlashan declined to comment on the fundraising for regulatory reasons.
But McGlashan and TPG don’t want to just make a dent in the world of impact with the Rise Fund. They want to bring innovation around impact to the broader world of investing. They have done just that recently with their measuring and reporting methodology for impact at Davos in January, TPG announced it would spin out its impact measurement arm into Y Analytics.
“What we knew was necessary is that we created a platform that allowed a common agreed-upon framework for measurement and reporting of impact,” McGlashan says. “It’s a commitment we made. It’s a little contrarian for a private equity firm to make our IP available to the world, but it speaks to our broader goal of supporting the industry, scaling the industry and ideally attracting a lot of competitors.”
When asked about the growth of the impact space, he thinks that the general shift on the institutional side to embrace impact has happened faster than he initially expected. But he also cites the $2.6 trillion a year funding gap between the money needed to meet the UN Sustainable Development Goals and what is being invested.
“I think we are at a tipping point where there’s a lot of interest,” he says. “You’re seeing it with competitors of ours coming into the space in a very substantial way. That’s something we very much hoped [for].”
Ultimately, McGlashan explains that if he, TPG and the rest of the industry do their job right, there should no longer be such a thing as impact investing in a few years. At least, that’s the goal.
“There’s just investing where the degree of impact, positive and negative, is reported in every investment that is made,” he says. “Clearly every investment has an impact. The question is what is the degree of impact.”
McGlashan joined TPG in 2004 and founded TPG Growth to focus on growth investing and the mid-market three years later. Also a managing director at TPG Growth, he founded the Rise Fund out of that entity and the two often invest together. Previously, he served as CEO of the Vectis Group, a venture corporation he co-founded to invest in and build companies in emerging markets alongside US tech companies
Stay tuned for all the winners in the PEI Awards 2018 on Friday.