Impact investment: Small is beautiful
To expect impact investment to be of greater size now than it is would be to miss the point of it altogether.
The impact investment community has seen a surge of enthusiasm of late.
At the end of April, KKR became the latest private equity firm to announce a billion-dollar impact investing fund that will reportedly focus on themes tied to the UN Sustainable Development Goals (SDGs). It follows Swiss-based Partners Group, the second-largest private equity group by market cap, which launched a $1 billion impact fund in March this year (again based around the SDGs), TPG’s $2 billion Rise fund last year, which invests in areas like agriculture and education, and Bain Capital’s smaller double impact fund.
For more than seven years, I’ve watched the size of the impact investing market creep upwards. Last year, the Global Impact Investing Network (GIIN) reported a “floor” estimate of $114 billion – likely several billion less than the true amount because GIIN only counts those funds that report to it – yet it is a drop in the ocean compared with other markets. Are private equity houses the answer to the big issue that the impact investment community talks about – scale? Can these larger firms help the market finally be taken seriously?
I think we are missing the point.