The Brief | January 14, 2025

The Brief: Can impact private equity funds weather the fundraising slump?

ImpactAlpha
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ImpactAlpha

Greetings Agents of Impact! 

Situational awareness. Under growing pressure from Republican politicians in the US, BlackRock quit the Net Zero Asset Managers Alliance, while Dutch pension fund Pensioenfonds Detailhandel exited the Net Zero Asset Owners Alliance. They are the latest defectors from the global financial climate alliances (see, “Public companies respond to the backlash against climate and diversity initiatives with surrender and defiance”). NZAM announced it was launching a review of the initiative “to ensure NZAM remains fit for purpose in the new global context.” 

In today’s Brief:

  • Impact private equity’s tough road ahead
  • Restoring Africa’s degraded lands
  • Hamilton Lane launches latest fund 
  • Human rights investing with a Palestine lens

As private equity fundraising goes south, whither impact investing in 2025? Institutional investors and other limited partners are impatient to get their money back from private equity funds. And as limited partners get crankier about their current private equity investments, they have become less willing to write new checks to fund managers, writes ImpactAlpha’s Snehal Shah. Private equity professionals had hoped 2025 would bring a surge of M&A and IPO activity, facilitating distributions for LPs. It still might. But with a two-year backlog, the exit environment is highly congested, putting downward pressure on valuations and deal volume – and slowing eagerly awaited distributions. Cash-strapped investors are showing a clear preference for lower risk, shorter-term and more liquid strategies within private markets, says Anna Morrison of the investment consultancy Bfinance. Impact funds have been caught in the downdraft. Pangea Ventures, for example, reached an $85 million final close of its second climate tech fund in September, short of its initial target of $100 million. Impact general partners could find themselves among the last in the breadline for private equity allocations, Morrison says. But there are some bright spots for impact funds targeting institutional investors.

  • Bucking the trend. In a survey of institutional impact investors that typically take LP positions, placement agent Rede Partners found that 61% had increased their allocations to sustainability and impact themes in the past two years. Rede reported in October that LPs had increased by 37% the capital available to invest in sustainability/impact. The most common driver: investor conviction in the attractiveness of the risk/return opportunity. Of 176 individual LP commitments in impact funds over the past 18 months, nearly three-quarters came from “generalist” investors, representing 62% of the capital raised. That may indicate that impact funds are becoming attractive to investors on a purely financial basis. The caveat: Impact funds are now competing with impact-agnostic funds for a slice of LPs’ private equity portfolios.
  • Beyond private equity. Impact allocations by institutional investors often cut across asset classes. The New York State Common Retirement Fund’s $40 billion target for climate investments, for example, can be invested in private equity, debt, infrastructure or green bonds. Impact GPs may find more success with private debt and infrastructure impact strategies and green bonds than with private equity. Prominent impact fund managers have anticipated the shift and launched sustainable infrastructure funds. TPG’s impact group Rise launched its debut Rise Climate Infrastructure fund last year with a $6 billion fundraising target. KKR launched its first Global Climate Infrastructure Fund in 2023 (also targeting $6 billion but forgoing the impact label) after closing its second impact private equity fund in 2023 at $2.8 billion. Just yesterday, private equity advisory giant Stepstone announced the close of its debut infrastructure fund, which focuses on energy transition, digital connectivity and AI.
  • Keep reading, “As private equity fundraising goes south, whither impact investing in 2025?” by Snehal Shah on ImpactAlpha. 

Dealflow: Impact Private Equity

Scoop: Hamilton Lane launches third impact fund. The investment management and consulting firm launched its third impact fund with a $600 million fundraising target, ImpactAlpha has learned. Impact Fund III, with a global growth and growth-oriented buyout strategy, will be invested directly in socially and environmentally impactful companies. Hamilton Lane’s impact fund series has the dual objective to “deliver strong financial returns and a positive impact to our planet,” David Helgerson, who manages the fund, said in the firm’s 2024 impact report. 

  • Energy transition. The previous fund in Hamilton Lane’s impact series closed in 2023 at $370 million, falling just short of its $400 million target after two years in the market. Target themes for the strategy include the clean energy transition (which makes up 65% of Hamilton Lane’s impact funds’ portfolio by value), sustainable processes (23%), community development (21%) and health and wellness (14%). Impact Fund II had stakes in 16 companies as of last September, including co-investments in digital learning company Penn Foster and energy efficiency venture CLEAResult. Hamilton Lane also manages impact allocations and sources fund and deal opportunities for institutional investor clients. When it closed Fund II, the firm announced it had raised approximately $500 million of impact-focused capital for separate accounts.
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WRI backs Barka Fund to invest in locally-led land restoration in Africa. Some 65% of African lands are degraded. Climate-driven droughts and floods are exacerbating the impacts on Africa’s local farmers and communities. Barka Fund, an early stage venture fund, was launched in 2020 to support African-led enterprises that help communities mitigate and adapt to climate change. The New York-based fund works with incubators and accelerators to identify high-impact startups and provides investment-readiness training. “Barka Fund, as a fund led by and for African women, exemplifies the leadership and innovation needed to restore degraded landscapes on the continent,” said Rebekah Shirley of World Resources Institute Africa, which invested $4 million in the first-time fund manager. Barka also has $8 million from the US International Development Finance Corp. toward its million funding target. WRI hopes to alert more funders to “the low-risk, high-reward potential of investing in emerging African institutions driving sustainable development.” 

  • Land restoration. Barka Fund has collaborated with WRI Africa on its TerraFund, a grant and loan program for African nonprofit organizations working to restore land and uplift communities (see, “Social co-benefits and ecosystem restoration begin to make climate adaptation investable”). TerraFund has invested $17.8 million in 92 organizations, including Addax, which is restoring degraded lands in Niger and generating revenue from gum arabic, and Association Mines Sans Pauvreté in Guinea, which restores the wooded habitats of endangered chimpanzees while supporting sustainable development and livelihoods. Barka’s Rekia Foudel said the TerraFund partnership with WRI has helped “build a strong track record and establish its credibility in the ecosystem.” Barka is earmarking one-third of its new fund’s investments for restoration, alongside sustainable agriculture and renewable energy.  

Dealflow overflow. Investment news crossing our desks:

  • Private equity firm Apollo is acquiring New York-based Argo Infrastructure Partners, an investor in renewable energy, digital infrastructure and other sustainable infrastructure. The acquisition will add $6 billion in assets and a team of 20 to Apollo’s Sustainability and Infrastructure strategies group. (Apollo)
  • Oakland, Calif.-based Brimstone finalized a $189 million loan with the Department of Energy’s Loan Programs Office to help defray costs for a first-of-a-kind plant for decarbonized cement, smelter-grade alumina – the core ingredient for aluminum – and other products. (Brimstone)
  • Origis Energy secured $290 million in debt financing from Natixis Corporate and Investment Banking and $125 million in tax equity from Advantage Capital for its Swift Air Solar project, a zero-emission solar plant in Texas that will supply power to a local Direct Air Capture facility. (Origis Energy)
  • Owl Ventures led a $10 million seed round for Tel Aviv-based Jotit to provide K-12 schools with its digital handwriting tablets. Recent studies have shown that writing by hand, as opposed to typing on a keyboard, enhances learning and memory. (Owl Ventures)

Impact Voices: Investor Advocacy

How investors can apply a Palestine lens to advance human rights. Reports of a breakthrough in talks aimed at securing a ceasefire in Gaza and the release of dozens of Israeli hostages have kindled hopes for a broader agreement to end the war. A working group of the Racial Justice Investing Coalition has focused on investors’ role in perpetuating or alleviating the conflict and the worsening humanitarian crisis. The group’s second webinar, tomorrow, Wednesday, Jan. 15, will focus on material risks that can be identified with a Palestine lens on investments, along with practical actions investors can take. “Companies providing weapons, military AI, surveillance technology, and other tools used to target civilians could be mired in litigation,” Anandi Somasundaram of the Racial Justice Investing Coalition writes in a guest post on ImpactAlpha. “This could present significant legal, financial and other risks for investors with exposure to these holdings.”

  • Weapons and surveillance. The Racial Justice Investing Coalition, formed in the aftermath of George Floyd’s murder in 2020, has grown to a network of more than 450 investment professionals and organizations. The coalition’s Investor Solidarity with Palestine Working Group last October convened more than 100 portfolio managers, impact investors, shareholder engagement activists, and social justice grassroots organizers to discuss the connection of investments in defense, surveillance, artificial intelligence and infrastructure and the conflict and human rights abuses in Palestine and elsewhere. Some AI identification applications, for example, are believed to be misidentifying Palestinian civilians as militants, Somasundaram writes. AI-driven projects such as “Lavender” analyze data related to nearly every person in Gaza to assess the probability they are a combatant, while another AI-driven program, “Where’s Daddy?” tries to identify whether targets are in their homes.
  • Collective action. The inaugural “Palestine in your portfolio” webinar featured Funding Freedom’s Soheir Asaad, a Palestinian activist, and Rebecca Vilkomerson, a Jewish organizer, highlighted the importance of investor action in addressing conflict and human rights abuses in the past. Tomorrow’s discussion, “A portfolio construction to divest from state violence in Palestine and beyond,” with participation from Kataly Foundation, Adasina Social Capital and Gaza Soup Kitchen, will explore the role of collective action. “Part of the continuing issue is the fear that speaking about Palestine may lead to backlash,” writes Somasundaram. “However, a more outspoken investor community, rooted in business and human rights frameworks, can collectively shift the industry at large.”

Agents of Impact: Follow the Talent

S2G Ventures, the sustainable food, agriculture, oceans, and energy investor spun out of Builders Vision, has changed its name to S2G Investments… Osei Van Horne, co-global head and managing partner of JP Morgan’s Sustainable Capital, has passed away, his wife announced on LinkedIn… Reinvestment Fund welcomes Henry Feinstein, previously with Anavi Strategies, as a policy analyst… Aligned Climate Capital promotes Julia Magliozzo to vice president… Af Hernandez, previously with NextEra Energy, joins Azolla Ventures as a principal.

Maximilian Macini, previously with Ilara Health, joins Stanford GSB Impact Fund as a healthcare investor… Overture adds Leila Perbay, a former director at EQT Ventures, as a principal. The firm also added Allison Hinckley, previously with F-Prime Capital, as a senior principal… Opportunity Finance Network is hiring a senior vice president of strategic communications in Washington, DC.

Catalytic Finance Foundation seeks an operations manager in Geneva… Aceli Africa is looking for a product associate, an HR and operations associate, and a monitoring and evaluation senior associate… Boston Consulting Group is recruiting a responsible AI senior solution analyst and senior applied scientist… Nordic Development Fund is on the hunt for a program manager… AlphaMundi Group has an opening for a Latin America-focused investment analyst.

Fresh Ventures is hiring an impact venture builder… Developing World Markets has an opening for an impact summer associate… Intelligent Impact seeks an operations director in Cape Town… Robert Wood Johnson Foundation and the National Association of Black Journalists will host, “Preserving the Homefront: Stories to be told about Homeowner Inequities 20 years post-Katrina,” tomorrow at 7pm ET / 4pm PT.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Jan. 14, 2025