“What is impact investing? Is it the same thing as sustainable investing? How is it mixed in with the ESG terminology?”
Allianz GI is the investment arm of Allianz insurance company. It has been a keen investor in private markets impact strategies, having committed to Trill Impact’s first fund and TPG Rise Climate Fund, per New Private Markets data. The paper outlines the LP’s approach to impact investing and breaks down investment opportunities into three typologies.
- Significant positive impact: The most advanced level of impact, this refers to companies that generate “substantial and measurable” positive impact by addressing social and environmental issues as a central part of their business model.
- Positive benefits: Companies that are generating positive outcomes, but not to the same extent as those in the first category. This may be because the company is not specifically targeting underserved populations, or the impact it is delivering is incremental. This also includes companies that are facing challenges in measuring the impact they deliver.
- Sustainability improvers: Companies that are not currently sustainable but are taking credible steps towards reducing their negative environmental or social impacts.
The paper includes case studies demonstrating what investment opportunities might look like for each typology across the energy, mobility, technology, education and health sectors. “We’ve been essentially collecting case studies on a deal-by-deal basis, because we’ve been operationalising the impact framework since 2020,” explained director of impact management and measurement Diane Mak. “Across our impact strategies, we’ve just seen different types of deals coming through. In our heads we’d already started classifying them via our due diligence process into roughly these three categories, but we hadn’t named them.”
Of the three typologies, significant positive impact is the main focus of Allianz’s impact strategy, though it will invest in companies that fit the positive benefits typology if the firm is confident that its engagement will help the company move to the top category. “We will have some positive benefit pieces that go into a portfolio because we have high conviction that we can get them to the next step. I don’t know that we would have a positive benefit company if we didn’t think we had a shot to move it all the way up. The goal is as much as possible to be in that significant positive impact [category],” explained Christensen.
Sustainability improvers do not form part of the firm’s impact strategy. However, they may be found in other private markets strategies focussed on transition.