Impact investing is the new hot area for money managers looking to burnish their ethical credentials. The allocation of funds to projects that put societal and environmental outcomes on a par with financial returns has become one of the fastest-growing parts of the asset management industry.
Large fundraisings include $2bn by the Rise Fund, co-founded by Bono of U2 and launched by private equity firm TPG Capital in its first round, and UBS, which has pledged to raise at least $5bn for impact investments linked to the UN’s sustainable development goals by 2021; so far it has raised $1.9bn.
The road to good intentions is paved with problems, however.
In a survey by KBI Global Investors, the Dublin investment manager, institutional investors and consultants said their top concern was finding unlisted companies that fulfill the idea of an appropriate mission and provide a suitable place to park funds.
More than 70 per cent said the difficulty of finding suitable companies in which to invest was the biggest challenge when looking for opportunities among private companies.
Eoin Fahy, head of responsible investing at KBI, said individuals with small sums to invest still had choices but institutional investors, which have greater firepower but have to do more due diligence, were finding it tricky to discover companies with both a social vision and the capacity to put large sums to work. He said:
“If you are a relatively large investor, perhaps a pension fund with several billion, […] finding opportunities at scale is relatively difficult.”
Investors can allocate capital to publicly listed companies but then it is harder to show a direct link between money spent buying shares in these and any positive impact by the business, Mr Fahy added.
The extra time investors needed to conduct due diligence and make deals with private businesses was also cited as a significant challenge.
Source Financial Times