Impact investing has well and truly moved from the margins of finance to the mainstream.
While it’s impossible to put a date on when this happened in private markets, you could argue it began in 2015 when Bain Capital hired former Massachusetts Governor Deval Patrick to launch a product “delivering attractive financial returns by investing in projects with significant, measurable social impact”, as the firm put it.
The firm’s Double Impact platform started investing in 2017. TPG’s Rise platform was founded in 2016 in conjunction with entrepreneur Jeff Skoll and rock star Bono, and its first fund started investing in 2017. KKR’s Global Impact Fund began investing in early 2019.
The arrival of these three private markets heavyweights was viewed as a clear signal that “solutions-oriented” investing could deliver competitive financial returns as well as positive impact, at a scale that would suit institutional investors.
The market has since grown and evolved apace.
LeapFrog Investments, longstanding advocate of profit with purpose, this week signalled its intention to close is fourth flagship fund – targeting $1 billion – in February 2024. In the announcement, founder and CEO Andy Kuper said its LP roster for the fund showed impact had “reached the boardrooms of the world”.
The concept of climate investing, meanwhile, has ballooned, spawning impact strategies across private equity, venture capital, debt, infrastructure and natural capital. Real estate impact strategies have also begun to gain traction among institutional investors.
With the rapid development of the impact field – both in terms of compelling new strategies as well as innovations in fund structures and impact measurement – we mustn’t lose sight of the financial proof points that will ultimately secure its future.
The early cohort of “mainstreamed” private equity impact funds has started to return cash to investors, but it is early days. Between the three of them, Bain, TPG and KKR raised approximately $3.7 billion for that first crop of funds. Based on a combination of pension documents and public filings, we can see that circa $1.8 billion has been distributed to investors and a further $4.3 billion remains in the ground (figures are approximate because sources differ).
Bain Capital Double Impact partner Todd Cook recently told us that we’re “on the verge of witnessing a wave of exits that prove the direct correlation between impact and growth”. Cook will be speaking on exactly this topic as part of the opening session, alongside JP Morgan Private Bank’s head of private equity due diligence John Ancona, at the Impact Investor Summit in New York at the end of October.
Given how important this wave of exits will be in the development of the overall impact industry, we expect this to be a well-attended session.