Impact-linked carry is about ‘consistency’, says Meridiam’s Thierry Deau

'If you’re driving your business through impact, everything has to be aligned,’ the veteran infrastructure manager tells delegates in Berlin.

Thierry Deau (right) speaks to speaks to Infrastructure Investor’s Zak Bentley. Source: Snehal Shah

To demonstrate consistency as an impact investor, firms should link their carried interest to impact or ESG objectives, said Thierry Deau, founder and CEO of impact investment firm Meridiam Infrastructure.

Speaking at the affiliate title Infrastructure Investor‘s Global Summit in Berlin, Deau explained Meridiam’s approach to impact investing, measuring impact and impact-linked carried interest. “We’re an impact investor using infrastructure to do impact. Impact drives the entire investment process,” he began.

Meridiam, an infrastructure firm with €15 billion in assets under management, manages regional funds with typically 25-year lives. The firm is raising its second Africa-focused fund, its fourth European sustainable infrastructure vehicle and green impact and urban resilience funds. For these, Meridiam will apply a discount to its carried interest if it fails to meet certain impact performance targets.

“It’s a question of being consistent. If you’re driving your business through impact, everything has to be aligned, from renumeration on a yearly basis to carried interest; otherwise the alignment is not quite clear.”

It is still a rarity for private fund firms to link their carried interest to impact or ESG targets, particularly among established managers. There is no standardised playbook governing the details of how these mechanisms should work, such as what happens to any carry that goes unearned if targets are missed. “We had the debate with the investors,” said Deau. “Rather than giving the carried interest back to them – because it would be an incentive for the investors for us not to perform on the impact side – we give the difference to a foundation.”

“It’d be great” if other investment firms “that clearly have an intent of impact could do that as a sign,” added Deau.

Meridiam doesn’t encounter conflicts between achieving impact and financial returns, said Deau, but it does see decisions to be made between impact objectives on any given opportunity, weighing, for example, environmental with social benefits. “It’s mostly an arbitrage between different impact strategies… this is where the real difficulty is.”

LPs tend to question the firm closely to ensure it doesn’t compromise on financial returns in the pursuit of impact, “but once that was clarified, we got a lot of support”. Meridiam’s investor base includes public pension funds, foundations and DFIs.

Measuring impact

Meridiam has built two impact measurement tools. The first is a climate-focused tool to “take the temperature of our portfolio” and “measure alignment with the Paris Agreement”, said Deau. The second measures each investment’s performance quantitatively in other impact areas and is built around four SDGs: the resilience of cities and sustainable infrastructure; access to clean energy; inclusion; and biodiversity.

“Our investors have a dashboard online where they can access their own portfolio to report the financial and non-financial data,” Deau added. “They love this kind of thing!” Meridiam built its own tools because “there aren’t so many other tools out there” to measure impact and sustainability, “and a lot of these methodologies were only focused on the qualitative. How do you translate qualitative data into quantitative data and into a scale? That wasn’t existent.”

Meridiam this year has raised more than €5 billion, increasing its assets under management but at the same time solidifying its impact investing credentials.


The current generation of vehicles qualify as Article 9 funds under the EU Sustainable Finance Disclosure Regulation. “Therefore, those new funds will specifically have sustainable goals as their objective,” Meridiam said in a statement.

Two of the five new vehicles are successor funds: Meridiam Sustainable Infrastructure Europe IV, which reached its €2.3 billion hard-cap five months after its launch; and Meridiam Infrastructure Africa Fund II, for which the firm raised more than €500 million, roughly two-thirds of its €750 million target.

Another €290 million has been raised for The Urban Resilience Fund, an impact vehicle Meridiam launched in partnership with the Rockefeller Foundation and the UN’s Capital Development Fund, to support cities in Europe and Africa deliver resilient infrastructure projects.

The Green Impact Growth Fund is a new offering and a completely new strategy for the Paris-based firm, since it is a growth equity vehicle that will invest in SMEs. “GIGF has already raised more than €150 million and will invest across five sectors: low carbon economy, circular economy, sustainable cities and smart buildings, clean mobility and sustainable agriculture and food,” according to the statement.

The fifth vehicle is the Meridiam Sustainable Waste & Water Fund, which is dedicated solely to New Suez, the company that is being carved out of French water company Suez that Meridiam is acquiring alongside Global Infrastructure Partners and France’s Caisse des Dépôts.

Kalliope Gourntis contributed to this report.