For some veterans of impact investing, the arrival of giant asset managers stirs mixed emotions. “It can be a little frustrating and seemingly a little unfair,” says one such manager who asks not to be named. “They did not spend years creating this industry and evangelising for impact investing.

“But business is not fair,” the same manager continues, adding that it is more productive to “focus on making the world better one investment at a time” rather than dwell on whether new arrivals are piggybacking on someone else’s hard work.

Impact investing in private markets – where investments pursue positive externalities alongside financial returns – has entered the institutional mainstream. Executives from the likes of Brookfield Asset Management, Apollo Global Management and TPG Capital now line up on impact conference panels alongside names from longtime, category defining firms like LeapFrog Investments and Bridges Fund Management.

Another longtime impact scenester describes themselves as being “supportive but bemused” by mainstream firms banging the impact drum to raise sizeable new funds. “The difference is that we do what we say, not say what we do,” the manager adds, but importantly stops short of accusing anyone outright of impact-washing.

Frustration or bemusement aside, the pioneers of the impact scene should not be put out by the new arrivals. Some, like Bridges, view it as an objective achieved.

When the firm was founded in 2002, it had two aims. One was to make investments that combine attractive returns with positive impact; the second was “to share what we learned along the way, build the field and promote the idea that incorporating impact in your business and investment decisions was the way of the future”, Michele Giddens, co-founder and co-CEO, told Private Equity International’s sustainability-focused affiliate title New Private Markets in July.

Bridges has been part of the impact vanguard and took a leading role in forming the Impact Management Project, an initiative well known in the field as providing guidance on how to measure impact. “As a firm that has tried to play its part in getting to this point, we have to first celebrate the fact that there are a lot of other players now,” Giddens said.

“We have known for a long time that the big shops would eventually catch up,” says Scott Barrington, CEO at North Sky Capital, a firm that launched an impact fund of funds in 2005. “This is why we spent so much time in those early years building relationships with all the key players and honing our deal sourcing and impact reporting capabilities.”

Bridging moment

Barrington describes the arrival of mainstream asset managers as additive. For one thing, it introduces a whole raft of large pensions – that need to write big tickets and therefore could not commit to smaller impact players – to the strategy. “We are at a bridging moment where these pension plans will start with the big shops and then begin discovering more intentional, yet smaller, funds to invest in, either through their now bigger fund sizes or separately managed accounts that create customised investment themes like the ones we are beginning to do.”

The market growth will also boost dealflow, adds Barrington, both for the firm’s impact secondaries business – which will have a larger universe of managers to work with – and for its lower mid-market sustainable infrastructure strategy, which “builds the renewable natural gas, water and solar infrastructure that the big shops ultimately want to buy”, he says.

Shami Nissan, head of sustainability at Actis, a firm that topped New Private Markets’ recent Impact 20 ranking of the largest private markets impact managers, is positive about capital flowing into “impactful sectors”, but vociferous about the need for all players to integrate sustainability into their entire investment processes, including intentionality, measurement and verification. “Without these spanning the whole investment process, there is a risk that sustainability is just being paid lip service,” she says.

Actis does not self-identify as an impact investor and does not have a standalone impact product. “What we do have is a long track record of actions and outcomes,” says Nissan. “We have an open-source methodology for defining, measuring and delivering positive impact whilst at the same time delivering competitive financial returns.

“We are observing how things play out, but we do have some concerns if such claims [from new entrants] set back the cause of sustainability.”

Jane Bieneman is a private funds and impact industry veteran and a senior adviser at consultancy Tideline. For her, the arrival of mainstream managers has helped the wider investment community break the mental connection between positive impact and below-market financial returns.

“I think that might be a myth that is going away, in part because of the mainstream players,” says Bieneman. “Every time one of the big firms goes on the road and talks about their strategy, it communicates more and more how almost all of the impact investing market – over 95 percent, based on GIIN survey data – is targeting market rate or better returns. But there is still education needed on that.”

Any scepticism there was about mega-managers entering impact has subsided based on how these firms have conducted their business, says Bieneman. “Overall execution has been good. Reputations are at risk and they are putting the right resources behind these strategies. Overall, while there are still some investor concerns, the mainstream firms are getting more accepted in the market.”