In brief: Two pieces of advice for impact-seeking LPs

Plenty of pearls of wisdom were dropped on-stage at the Impact Investor Global Summit on Wednesday. Here were two for the limited partners in the crowd:

1. Be demanding on data, transparency and incentivisation, said Rikke Kjær Nielsen, partner at EQT and co-founder of the firm’s “impact-driven” EQT Future fund: “In the shoes of the LP, I would be very interested in how committed is the GP to saying what they do, and doing what they say. Will they be tying their own compensation to achieving impact KPIs? Will they be committed to transparently reporting the targets, following up on them and continuously reporting on progress. All those difficult questions I would make sure to ask very diligently.” It may come as no surprise, that EQT is indeed tying its compensation – in the form of carried interest for the Future fund – to impact KPIs.
2. Anita Bhatia, investment director at the Guy’s and St Thomas’ Foundation, said that LPs need to be active and engaged, have robust due diligence process and to be sure to read every quarterly report. “But the most powerful tool is if you can get GPs to establish an impact committee and take a seat on it,” she said. If not, have impact as an agenda item on any other advisory committee you have in place. “This is the most powerful way to engage regularly and check that managers are hitting their milestones on impact.”