Todd Cook, a partner in Bain Capital‘s Double Impact strategy, offers his thoughts on the first half of 2023. The strategy has raised more than $1.1 billion of impact capital across two funds, according to NPM data.
How has the scaling and mainstreaming of impact investing affected your business – is there more opportunity or more competition now?
We’re observing two significant turning points in the impact investing sector. First, we’re on the verge of witnessing a wave of exits that prove the direct correlation between impact and growth.
Acquirers, whether sponsors or corporate leaders, acknowledge that impact-driven companies have strong fundamentals that offer potential for long-term growth, financial success and resiliency.
We recently exited HealthDrive, a leading multi-specialty clinical service provider, and Sparq, a leading provider of outsourced digital engineering solutions. Both demonstrated the value of impact-driven companies growing sustainably and producing high-quality returns. Second, as competition heightens, companies are seeking value-added partners who comprehend their business and the competitive nuances of their industry. This requires a combination of operational and strategic resources plus a mission-driven ethos to align with management and promote success.
Which impact themes and strategies do you consider most exciting and untapped?
We are inspired by the leaders and companies working to address structural inequalities by enabling access to quality healthcare and education, as well as mitigating the ongoing and devastating effects of climate change on communities around the world.
For instance, we recognise the pressing need for solutions that combat harmful pollution in our soil, water, air and biodiversity. AqueoUS Vets addresses this issue utilising an array of effective water treatment solutions to tackle contaminants in the US water infrastructure, such as PFAS. These “forever chemicals” can take four to 15 years to reduce by half in the human body and centuries to disappear from the environment.
Which impact themes and strategies do you not plan to invest in?
We invest in areas where we believe we can bring significant value as a team and from across the Bain Capital platform. These areas include impact themes like healthcare, education and workforce development, and sustainability. For example, we’ve collaborated with colleagues on our private equity healthcare team because our collective depth of experience across the value chain and at different stages of companies provides us significant advantages. We are also active, engaged investment partners and thus far we have avoided impact investments in emerging markets due to the challenge of being on-the-ground, highly active partners with management.
Do you use benchmarks to evaluate your impact? Is it a useful exercise?
We have implemented a two-pronged impact measurement system that uses both third-party and internal assessments to track our progress. From the beginning, we have used the B Impact Assessment and worked with each portfolio company’s management team to establish and adhere to a set of customised impact metrics that align with the company’s growth. Our recent exit, HealthDrive, increased its B Impact score by 63 percent to 113.7 during our partnership.
We also utilise external assessments to evaluate our portfolio as a whole. We were honoured to be recognised as one of 10 practice leaders by BlueMark, an impact verification organisation, for consistently ranking in the top quartile across all Impact Principles. Transparency is critical to us, and we measure against portfolio-wide metrics such as carbon emissions, growth, and portfolio and team-wide diversity. We publish all of these metrics each year in our Year in Review reports to provide transparency to our investors, portfolio companies and stakeholders.