HESTA, Australia’s A$68 billion ($46.9 billion; €43.7 billion) superannuation fund for health sector workers, has entrusted Stafford Capital Partners with $200 million for SDG-aligned investments.
The vehicle is a fund of one – a structure that Stafford has also set up with a handful of other impact investor clients. HESTA has previously committed $250 million in two mandates with Stafford for sustainable and impact investments.
Stafford is seeking co-investment opportunities alongside impact fund managers and “sustainable GPs that don’t necessarily have the ‘impact’ tag”, managing partner Rick Fratus told New Private Markets. Target deals include profit-generating growth and buyout opportunities: “private equity-owned companies where there’s low-hanging fruit in terms of growth and operational efficiency, or classic buy-and-build strategies”.
HESTA has selected six of the UN’s sustainable development goals to align investments to: Good Health & Well-Being, Gender Equality, Affordable and Clean Energy, Climate Action, Clean Water and Sanitation, and Decent Work and Economic Growth. The strategy is targeting “above-market-rate” returns, but this should not lead to concessions on impact, said Kurt Faulhaber, a partner at the firm. “These [potential portfolio] companies are positioning themselves for the future, so I believe they will achieve above-market returns in the long term.”
Stafford has developed a proprietary impact indexing and measurement tool to project both the impact and the operational sustainability of potential deals, which it will use to diligence all deals in this strategy. HESTA will also be involved in all investment decisions.
Stafford is particularly interested in GP-led single-asset continuation funds due to its prior experience in this area: the firm manages secondaries, private equity, timberland and infrastructure funds of funds. It “would look at anything… to do with climate change or social impact”, Fratus added. What about distressed assets with growth potential via a sustainability transition? Not particularly, said Fratus, but Stafford will evaluate opportunities on a case-by-case basis.
Impact funds of one “allow pension funds to pursue their specific impact goals and priorities”, said Faulhaber. He expects Stafford will continue to deploy investor capital via such mandates, but will not launch a commingled impact fund anytime soon because “it’s hard to get investors aligned on what impact they want”.