Buyout leaders are spearheading the impact investing movement.
At the end of 2021, the impact investing market reached over $1 trillion in AUM, according to the Global Impact Investing Network, and the ecosystem has a number of private equity managers to credit for its expansion. In recent years, buyout players such as TPG, KKR and Bain Capital have raised multimillion- and billion-dollar funds dedicated to measurable social and environmental impact.
In 2022, TPG Rise Climate, a fund targeting investments in climate solutions, closed on $7.3 billion, making it the largest US PE impact fund to date, according to PitchBook data. The fundraise was a function of the firm's $14 billion TPG Rise global impact investing platform, which launched in 2016 and focuses on climate and conservation, education, financial inclusion, food and agriculture, and healthcare. The firm measures the impact of these investments through a metric called the impact multiple of money, which encompasses various factors including the economic value of an investment, the social return on every dollar spent and specific environmental outcomes.
"It was important for us to build a very rigorous standard because, as the first large-scale PE impact fund out there, we wanted to set a very high bar that LPs could, in a way, measure other impact funds as they came to market," said Maya Chorengel, co-managing partner at the Rise Fund.
While TPG still dominates the impact arena in terms of fund size, the space is getting more sophisticated, and similar players are also making moves. For example, in 2022, growth equity firm General Atlantic closed its BeyondNetZero fund on $3.5 billion, and KKR raised around $1.9 billion for its second impact fund.
"[LPs] are getting more sophisticated and more demanding, and they are getting better at identifying private equity impact efforts that aren't meeting the expectations of their own impact underwriting," said Chorengel.
We compiled a list of the five largest US PE impact vehicles by fund size operating in 2023.
