Editor’s note (March 28) — The leadership team of TPG Growth’s Rise Fund shared a letter with their networks late Wednesday. Excerpts:
“We launched Rise in 2016 with a clear vision: to harness commercial capital, at scale, to build successful businesses that drive meaningful and measurable positive change. In 2017, the Rise leadership team, supported by the broader TPG organization, began this work by raising $2.1 billion in commitments in our first fund, half of that from investors who had never allocated capital to an impact fund before. We remain committed to the vision we began with, and we are excited about the addition of Jim Coulter to our leadership team, given his personal role in building Rise and his established investment leadership experience.
“Right now, we’re keeping our focus on three things: backing the valuable work of our entrepreneurs, supporting our portfolio companies and the impact they are creating, and responding to any questions about the potential of Rise and reassuring our stakeholders that we remain committed to the highest standards. As we move forward from the events of the last two weeks, it is the stories of our portfolio and the voices of our entrepreneurs that demonstrate the true substance and character of The Rise Fund.
“To date, we have invested in 30 companies in the US, China, India, and multiple countries in Latin America and Africa. Fifteen of those investments have been in the emerging markets. These companies span education, healthcare, financial wellness, energy, technology, and conservation. Rise is a portfolio of compelling businesses that deliver positive social and environmental impact as part of the core DNA of their products and services. Our portfolio includes:
- “Companies driving energy conservation and clean fuel use, like Fourth Partner Energy, which is providing solar energy in India, and CLEAResult, which is facilitating energy efficiency in North America. Together, our companies that are contributing to clean energy have averted approximately 2.7 million tons of carbon dioxide from being released in the atmosphere since our investment;
- “Companies enabling Americans to live healthier financial lives, like Varo Money and Acorns, and powering financial inclusion among the underbanked, like CD Finance in China. Our financial services portfolio has increased financial wellness and inclusion for an estimated 2 million lower income individuals in the past year, helping them save for the future, increase financial resilience, and access finance to build their businesses;
- “Companies bringing financial services and market access to smallholder farmers, like Cellulant in Africa and Dodla Dairy in India, which provide timely, regular, and transparent payments and help increase household incomes, benefitting approximately 240,000 rural families;
- “Companies that are transforming education, like DreamBox Learning and Renaissance Learning, which are delivering learning tools for US students that measurably improve academic outcomes, EverFi, whose programs reduce sexual violence and alcohol abuse on college campuses, and Digital House, which provides technical education for Latin American professionals to prepare them for an expanding job market. Together, these companies have enriched the education of an estimated 20 million students since our investment;
- “Companies that are innovating to provide cures and treatments for cancer, cataracts, diabetes, and seizures, like Allogene, ViaCyte, Reflexion, and Ceribell; and
- “Companies like Wilderness Safaris, which has protected approximately 1.7 million hectares of land across 7 countries in Africa, conserving biodiversity and species that are otherwise threatened by poaching and generating much-needed rural employment.
“The Rise portfolio includes healthy, growing businesses that we believe can deliver on our vision of colinear financial success and impact. We look forward to sharing more of their stories with you to demonstrate the depth of The Rise Fund’s work and our path going forward.
“We are proud of the commitment we made, from the start, to underwrite impact as rigorously as we underwrite financials, grounding our impact assessments in third-party research and evidence and holding ourselves accountable for the impact we estimate our portfolio companies can create. This work led us to launch Y Analytics, an organization wholly dedicated to rigorous impact assessment, so that these approaches and methodologies can be continuously advanced and expanded for the benefit of the broader impact investing field.
“More than 100 professionals from TPG Growth and The Rise Fund are working directly on investing and business building for our portfolio companies, and they are supported by more than 1,000 employees across TPG. Our team, our partners, and our portfolio are strong, and we are more focused than ever on realizing The Rise Fund’s potential.
“We are deeply committed to our investors and to our companies, and we see that commitment as inextricable from the work that all of us are doing together to help create a healthier, more equitable, and more sustainable future. We want to thank you for partnering with us in this journey. We look forward to continuing our work with you.
“Maya Chorengel, Jim Coulter, Steve Ellis, Matt Hobart, Ransom Langford, Mike Stone, and Jerome Vascellaro”
The ‘Red Ferrari Syndrome’ and other lessons of impact investing’s Varsity Blues scandal
Editor’s note (March 15) — ‘Scaling with integrity’ was the theme of this week’s annual meeting of the investors council of the Global Impact Investing Network on Long Island outside New York. The closed-door huddle got underway the same day news broke that the CEO of the most highly scaled impact fund of all had been caught on tape acting with a distinct lack of integrity in the “Varsity Blues” college-admission scam. Bill McGlashan, the brash and brilliant force behind The Rise Fund, was quickly put on leave; two days later he was fired for behavior a spokesman called “inexcusable and antithetical to the values of our entire organization.”
Does McGlashan’s fall signal some kind of moral rot at the core of impact investing, as some commentators have suggested? Or is it the very contrast with Rise’s stated goals – including “build businesses that expand access to educational attainment, boost educational achievement, and strengthen pathways to employment” – that made McGlashan such an emblem of bad behavior? Self-dealing and hypocrisy is not unique to impact investing. What is new in business and finance is the expanding culture of, and toolkits for, accountability for social impact.
For my money, I’ll take intentional capital and the occasional embarrassment over conventional capital with little accountability to social justice. Reforming the rigged college-admissions process, not to mention a host of other social challenges, requires investment and innovation (see No. 3). TPG Growth has already raised $1 billion toward its planned $3 billion Rise II; it already has allocated nearly $2 billion from Rise I. Raising and deploying capital on that scale puts Rise in an impact investing league of its own. You can bet there will be a lot of people watching closely whether they scale with integrity.
– David Bank, editor
ImpactAlpha, March 12 – In the morning, Bill McGlashan’s name was among the 50 people charged in Operation Varsity Blues, the federal crackdown on a wide-ranging college admissions scam. By afternoon,the private-equity power player had been placed on leave – and the future of impact investing’s most prominent fund manager was in doubt.
McGlashan, who built TPG Growth into a $13 billion juggernaut before raising a $2 billion impact fund, was in the midst of raising $3.5 billion for Rise II, one of the world’s largest impact funds.
“As a result of the charges of personal misconduct against Bill McGlashan, we have placed Mr. McGlashan on indefinite administrative leave effective immediately,” said a TPG spokesperson. Jim Coulter, the co-CEO of TPG, is taking over as interim managing partner of both TPG Growth and The Rise Fund, the spokesperson said, and will “lead all investment work for both going forward.”
The impact on impact investing could be significant. McGlashan, who co-founded the Rise Fund with U2 frontman Bono and billionaire Jeff Skoll, had attracted a Who’s Who of investors, including Richard Branson, Reid Hoffman, Laurene Powell Jobs and Pierre Omidyar, along with pension funds and other institutional investors. He had become an outspoken advocate of a brash approach that aimed for high returns and high impact, which Rise seeks to measure with a methodology it calls “the impact multiple of money.”
Rise Fund’s Impact Multiple of Money: A conversation with TPG’s Bill McGlashan
Significantly, Rise had been close to a deal to take over a Gates Foundation-backed $1 billion global health fund from the Abraaj Group, which was brought down last year by a scandal of its own.
The Varsity Blues indictment presents an awkward juxtaposition to McGlashan’s rhetoric of social equity and justice. McGlashan is accused of making a $50,000 contribution in exchange for falsifying his son’s college-entrance test results, and promising another $200,000 once he was admitted to the University of Southern California.