Apollo Global Management is tying 10 percent of its carried interest for the $1 billion Impact Mission Fund to impact and non-financial performance, New Private Markets has learned.

All of the carried interest – including the 10 percent contingent on impact performance – is first subject to AIMF’s financial performance hurdle, a source said. The impact-linked carry award is determined for each portfolio company individually, according to two sources.

Apollo takes into account three ways of measuring non-financial performance, according to a document produced by Apollo and seen by New Private Markets: KPIs for positive impact, KPIs for negative impact and B Lab scores.

To measure positive impact, the firm identifies between three and five impact KPIs for each portfolio company and sets performance targets based on these KPIs post-investment, the document states.

For negative impact, Apollo identifies potential harms its investment could cause to society and the planet prior to investment. Post-investment, it identifies KPIs and targets for mitigating or reducing these harms.

Upon acquisition and then annually, Apollo requires each portfolio company to undertake the ‘B Impact Assessment’ – the tool created by B Lab, the US non-profit that certifies B Corps. The tool measures companies’ impact on “environment, communities, customers, suppliers, employees and shareholders”, B Lab’s website states.

Any of these KPIs may be modified during the investment period at Apollo’s discretion, a source said. Apollo has created an impact advisory committee and has contracted an external impact consultancy to support the firm with measuring impact and setting impact goals.

Differing LP views

Several impact fund managers have made part (or all) of their carried interest subject to non-financial outcomes. The most prominent examples are EQT’s Future fund, Apax, L Catterton and Generation IM offshoot Just Climate.

Limited partners have differing views on the value of the impact-linked carry. For some, this mechanism can provide additional confidence that the GP is serious about impact and that the vision for positive social or environmental outcomes outlined by the GP is not simply marketing. But others have argued that such structures risk distracting from the GPs’ fiduciary duty, or that the additional cost of measuring and auditing the KPIs is not worth the outcome.

The Impact Mission Fund

AIMF is an Article 9 buyout fund that closed on $1 billion in 2022, New Private Markets’ database shows. The fund invests along “impact-aligned investment themes, including economic opportunity, education, health, safety and wellness, industry 4.0 and resource sustainability”, according to a December 2021 memo by the New York State Common Retirement Fund, which committed $150 million to the fund. Other LPs include insurance companies MetLife, The Hartford and Athene Holdings, as well as Norinchukin Bank, which committed ¥15 billion ($120 million; €110 million).

Apollo launched its impact business in 2020 under impact co-heads Marc Becker and Joanna Reiss. Becker died in August 2023 after a cancer battle; Apollo announced to LPs in late 2023 that it had appointed Steve Martinez to join Reiss as co-head, while Patience Marime-Ball had been made chairperson of the impact investing business.