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Alternative Market Briefing

Private equity can boost impact investing, but GPs have to focus on transparency and trust building KMPG says

Thursday, June 20, 2019

Bailey McCann, Opalesque New York:

The impact investing market size is now estimated to be $502 billion. But is private equity ready for it? A new report from KPMG surveyed senior private equity executives who are active in impact investing and asked them how funds can be successful if they shift to investment strategies that include positive social outcomes.

According to the findings, impact investing strategies can actually be beneficial to private equity in many of the same ways that adopting ESG frameworks have helped equity funds outperform. GPs are finding that impact investing can help solve for increasing investor demands for solutions-focused capital and provide unique investment opportunities. Many LPs view impact investing as an extension of the ESG strategies they are already using elsewhere in the portfolio and expect private equity to follow suit.

GP respondents tell KPMG that when it comes to impact investing, the LPs that are interested are no longer just the predictable ones e.g. those from mission-driven organizations or big pension funds. Increasingly, mainstream investors want to see strategies that have an impact component as well.

Measuring impact

The creation of the UN Sustainable Development Goals has been a helpful tool for GPs as they work to create measurable impact through their investments. Using the goals as a framework, GPs have had success with mapping investments to specific goals and reporting tangible outcomes back t......................

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