Two investment consultancies have launched an impact fund of funds to resolve the obstacles that would-be impact investors face in deploying capital.
Planet & People One is a newly-launched joint venture between impact advisory firm Collective Action and Nordic Investment Opportunities, a platform that gives institutional and professional investors access to private funds. P&PO is seeking to raise €150 million for its first fund from approximately 10-12 investors, such as family offices, foundations, institutions and corporates with smaller allocations for impact.
The fund will be jointly managed by NIO and Collective Action, with a team of 10 employees from the two organisations dedicated to P&PO. Xenia Loos, Collective Action founding partner, will be a member of P&PO’s investment team and Michael Greve, chief executive officer of NIO, will be a member of its investment committee.
“To best capture the opportunities, we believe the best approach is to invest through specialist funds and teams with deep industry expertise,” Loos told New Private Markets.
“In my conversations with investors, [many] share the view that impact investing is best done by subject matter experts,” added Greve. “The challenge [for investors] is combining those specialist-knowledge funds and achieving enough diversification, and also scaling the programme.”
Many impact investors have voiced a preference for thematic specialists. Notable examples are superannuation fund Hesta, endowment manager Glenmede and Dutch pension manager PGGM – all three speaking to Campbell Lutyens in 2021 – and multi-family-office Vedra Partners.
P&PO plans to invest in specialist funds along six themes: climate solutions, circularity, water, food and agriculture, healthcare and education. The market of specialist impact fund managers is vast, says Loos: P&PO’s team is tracking approximately 500 GPs and met with 150 GPs in 2022, she said.
The thematic approach presents certain challenges for LPs, however. “The dedicated and specialist managers tend to be smaller, which makes it resource-intensive for investors to deploy a meaningful and diversified programme,” said Loos. “This is a market dominated by a younger generation of managers,” with more than half of GPs being first- or second-time funds, she added – so “diversification and verification of team, strategy, impact, and operations becomes even more important. It is challenging for an LP to allocate sufficient capital to justify the resource requirement” of developing a strategy, diligencing funds and executing commitments.
P&PO’s proposition is to do this legwork for investors. The debut fund – which plans to start investing this summer – will make between eight and 12 fund commitments across its six themes. P&PO’s objective is to help new impact investors gain exposure to the market, said Loos. And it aims to help impact investors with existing impact strategies to diversify their portfolios and increase their exposure to particular themes according to their preferences. A large part of P&PO’s offering for LPs is co-investment opportunities in specific funds or underlying assets.
Impact measurement and management is the concern P&PO hopes to resolve for investors. Most investors P&PO has spoken to in its market testing for its debut fund “have said they are worried about greenwashing, what they would measure, how they would measure impact and what makes a good impact management strategy”, said Loos. Collective Action and NIO have developed a framework to assess GPs’ impact strategies to meet PP&O’s own impact goals and requirements. And one of its team members has created a proprietary impact data reporting tool which “allows us to gather impact data and efficiently and transparently show investors what impact their commitments are making and progress against KPIs”.