ImpactAlpha, March 1 – A focus on climate and impact-linked compensation are among the trends in this year’s ImpactAssets 50 list. Some 155 impact funds representing $97 billion in assets under management made it onto the hotly anticipated list, culled this year from a record 343 submissions.
“The growth and the number of funds that are applying, the diversity of strategies that people are advancing, and the increase in the emerging manager roster all speak to continued uptake and appetite for this type of investment approach,” ImpactAssets’ Jed Emerson told ImpactAlpha.
Even in the face of attacks on environmental, social and governance issues, he added, “investors are still saying, I need to be a part of this, I want to deploy my capital on these terms.”
The IA 50 – or should we say IA 155? – is broken into three categories: emerging impact managers, “emeritus” impact managers, and the core ImpactAssets 50. The list, now in its 13th year, is meant to showcase the breadth and depth of impact funds that are open to US investors.
Newcomers
More than a dozen impact funds made their first appearance on the 13th IA50. They include South African clean energy investor community Inspired Evolution Investment Management, Vancouver-based cleantech investor Active Impact Investments Management; Atlanta-based Collab Capital, which invests in Black-led businesses; and community lenders Blue Hub Loan Fund and Century Housing Corporation.
Impact-linked pay
Almost a quarter of all managers report integrating impact results into their compensation strategies, up from 16% last year. Some of the more comprehensive approaches involve setting impact targets at the outset of an investment with specific impact objectives and quantifiable targets to be achieved over the lifetime of an investment, said Sandra Osborne Kartt with ImpactAssets Capital Partners. A portion of the firms’ carried interest is tied to the portfolio companies meeting the pre-set impact targets.
Nature rising
Clean energy and climate tech are the predominant targets for climate-focused funds. But nature-based solutions are making a showing. Superorganism Ventures bills itself as a biodiversity investor. Emerging manager Trailhead Capital backs entrepreneurs focused on regenerative food and agriculture. And BTG Pactual Timberland Investment Group focuses on sustainable land management and forestry.
Alpha in impact
The majority of the ImpactAssets 50 managers target market rate (43%) and above market rate (31%) returns. Some 79% of IA 50 managers report meeting their finance return targets and 21% report surpassing them.
The IA 50 was launched in 2011 in response to inquiries from investors wondering how to get started, said Emerson. At the time, ImpactAssets wondered if they would get even 50 submissions. “Now it’s less a question of where do you go to start,” he added, “but how do you navigate all the diversity and opportunity that’s out there.”
