Private markets: (em)brace for impact


Private markets: (em)brace for impact

Vertical farming, access to education, decarbonizing industrial processes. These are just some examples of themes that private equity impact funds invest in. Impact investments have a clear social and/or environmental purpose alongside a financial return objective with the intention to be a force for good and clearly measuring the impact. In this paper, we describe the private equity impact investing universe and provide guidelines for selection of appropriate impact funds.



Our key findings are:

  • Private equity is a well-positioned asset class to make impact. Fund managers often take a controlling stake in a company leading to considerable influence to deploy dedicated impact initiatives. Private companies often focus on new, disruptive technologies, are flexible to change their business model and can quickly scale up.
  • We classify impact funds as either small specialists, small generalists or large generalists that differ in fund size and number of investment themes they focus on (specialists aim to make impact in one or two investment themes or SDG’s). Smaller funds have a greater potential to make impact whereas larger funds are typically better governed but run a greater risk of impact washing (reported impact deviates from actual impact).
  • Selecting a suitable impact fund raises additional considerations: what and how much impact does the fund intend to make? Why has the fund manager started an impact strategy? Are financial incentives aligned with impact goals? How is impact measured? Selecting the appropriate fund is key to achieving the financial and impact objectives.

 

Private Equity Impact Investing - April 2022.pdf

(547KB) PDF


More about the authors

Jasper van der Meulen, CFA Portfolio Manager, Private Markets

Jasper van der Meulen works as a Portfolio Manager Private Markets in which he focuses on monitoring and selection of external private equity managers.


Remco Flapper Strategy lead Private Markets

Remco Flapper is Strategy Lead Private Markets at Aegon Asset Management, with a focus on private equity and private debt.



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