Frontier and Growth Markets | May 14, 2018

Global private equity: Closing the gap between “we already do it” and allocations to impact investing

Dennis Price
ImpactAlpha Editor

Dennis Price

UPDATE: Day 2 review of the Global Private Equity Conference

How impact investors are putting capital to work. Sandeep Farias, a co-founder and managing director at Elevar Equity said impact, “starts from the micro and the need to create impact for the individual customer. Customer-centricity is the most authentic approach in his view, but to truly succeed, entrepreneurs need to create business models that deliver high scale at affordable margins. Because individuals and groups on the ground differ in how they perceive value and authentic impact, fund managers and their LPs should be cautious about setting one objective standard for impact. Therefore, Mr. Farias suggested that entrepreneurs should build businesses with an integrated mindset in which ‘impact metrics answer the business case and vice versa.'” – from EMPEA’s day 2 recap.

UPDATE: Day 1 review of the Global Private Equity Conference

A conversation between The World Bank’s Jim Kim and The Carlyle Group’s David Rubenstein. “Mr. Rubenstein argued that investors focused on getting the highest possible returns while social impact was not a major consideration. Mr. Rubenstein predicted that more private equity capital would enter emerging markets over the next 10 years as the economic climate and growth trends continued to improve. Both Mr. Rubenstein and Dr. Kim agreed that private equity needs to get better at describing what it means by impact and integrating that into discussions of risk and reward. Moreover, any focus on impact investing is not sustainable if it can’t generate reasonable returns,” – from EMPEA’s day 1 recap.

There’s a 47 percentage point gap between private-equity limited partners who say they consider environmental and social impact when making investments and those who have dedicated allocations to impact investing, according the Emerging Markets Private Equity Association’s 2018 survey.

How to close that gap will be a featured discussion at this week’s Global Private Equity Conference from the International Finance Corp. and EMPEA in Washington D.C. Among the headliners:

  • Mainstays… Bert van der Vaart, the CEO of the Small Enterprise Assistance Fund, will share lessons from the fund’s experience making impact investments such as that into the Phuong Chau hospital in Vietnam. Andrew Kuper of LeapFrog Investments has attracted top talent, raised over a billion for frontier market investments and backed companies that now reach more than 100 million people. Paul Sanford, the chief investment officer at Trilinc Global, will tout the firm’s nearly billion dollars in private debt investments to small and medium-sized businesses in Latin America, Southeast Asia and Sub-Saharan Africa.
  • Newcomers… Maya Chorengel of the $2 billion The Rise Fund will share the story of TPG Growth’s foray into emerging-market impact investing, including through the fund’s latest investment in African digital payments provider Cellulant (more on this in ImpactAlpha’sDealflow tomorrow).
  • Absent… Notably absent from the main stage of this year’s conference is The Abraaj Group, the growth-markets private equity firm struggling to right the ship after the Gates Foundation, the IFC and the CDC Group took the firm to task over allocations from its billion-dollar Growth Markets Health Fund. Last year at the conferenceSev Vettivetpillai, then head of impact investing at the Dubai-based firm, spoke to the role of the private sector in delivering the U.N. Sustainable Development Goals.