Private Equity Impact Investments

What are Impact Investments?

Before getting into private equity impact investments, let’s start with a brief introduction on impact investing.

Impact Investments are investments made in social enterprises or investment funds that seek to generate positive social and/or environmental impact alongside a financial return. As opposed to SRI and ESG investing, which rely on exclusionary practices to screen out harmful investments, impact investing aims to bridge the altruistic principles of philanthropy with traditional investing. You can learn more about the differences between these types of investing in our article SRI vs. ESG vs. Impact Investing.

Depending on the strategic goals of the investor, impact investments can be made in frontier, emerging or developed markets, and can target a range of financial returns from commercial (“market”) returns to concessional (“below-market”) returns. Impact investments can also be made through various asset classes, and can focus on varying impact themes.

According to the Global Impact Investing Network’s October 2022 report, the impact investing market currently exceeds $1.16 trillion in assets under management. In April 2019, GIIN estimated the market size at $502 billion and by 2020 that estimate had grown to $715 billion.

What are Private Equity Impact Investments?

Private equity as an asset class describes investment partnerships that buy and manage companies before selling them – typically on behalf of institutional and accredited investors. Private equity funds may acquire private companies or public ones in their entirety, or invest in such buyouts as part of a consortium. They typically do not hold stakes in companies that remain listed on a stock exchange.

Private equity impact investments are investments made by private equity funds to acquire and/or reorganize businesses to achieve a financial return for investors while generating some measurable positive social and/or environmental impact. These types of investments have been increasingly popular, as investors’ appetite for impact grows. What used to be the territory of core impact investors like Bamboo Capital Partners or LeapFrog Investments is now attracting some of the biggest Private Equity funds, like TPG, KKR, and Bain Capital.

Types of Private Equity Impact Investments

There are various types of strategies that can be used by Private Equity funds to acquire and/or reorganize businesses to achieve a financial return. For the most part, the strategy used typically depends on a target company’s lifecycle or maturity. Depending on these factors, a company will attract different types of private equity funds with different investment strategies. Some of the most common private equity investment strategies include:

Venture Capital: This strategy involves investing in early-stage companies that are developing new products or technologies and have high growth potential.

Buyout: This strategy involves acquiring a controlling stake in a company and then restructuring or repositioning the business for future growth and profitability.

Growth Equity: This strategy involves investing in companies that have a proven track record of growth and are seeking capital to continue that growth trajectory.

Distressed/Turnaround: This strategy involves investing in companies that are facing financial difficulties and are in need of operational or financial restructuring.

Mezzanine: This strategy involves providing financing to companies in exchange for a combination of debt and equity. The goal is to provide growth capital without diluting the ownership of existing shareholders.

Examples of Private Equity Impact Investments

We are constantly looking for institutional-grade impact investing opportunities across various sectors, geographies, asset classes and impact themes. Below you will find some examples of private equity impact investments listed on Impact Capital Partners.