ImpactAlpha, Mar. 2 – An experiment is going on inside Apollo Global Management and other major private-equity firms that are dipping their toes into impact investing. Will the logic, values and practices of their billion-dollar (or so) impact funds take over the larger firms, or vice versa?
At Apollo, impact investing veteran Lisa Hall is bringing in nearly a dozen impact practitioners to help her drive impact investing deeper into the portfolio of the $455 billion asset manager. “There is an expectation, more and more, that impact approaches will infiltrate the firm,” she told ImpactAlpha.
The firm’s new impact advisory committee, she says, “will help Apollo turn around companies that are generating impact, but could do a better job.”
That could apply to Apollo itself, which is raising a $1 billion Apollo Impact fund, as well as major private-equity firms like TPG, KKR, Bain and Blackstone. Increasingly, the scrutiny that comes with impact investing is being applied to the firms as a whole, holding them accountable for their entire portfolios, not just their impact funds.
Hall, whose title is chair of Apollo’s impact platform, has led teams at Calvert, Anthos and Georgetown University’s Beeck Center for Social Impact and Innovation. She told ImpactAlpha that after eight months on the job, Apollo has “exceeded my expectations.”
Among the milestones so far: Apollo Impact has signed on to the International Finance Corp.’s operating principles for impact management (see, “‘Operating principles’ help investors hold asset managers accountable for impact”) and joined the Impact Capital Managers network (“‘Impact alpha’ fund managers seek co-investors to scale impact investing”). Hall is an advisor to the Impact Management Project, which has become the consensus reference point for industry best practices (see, “Raising the bar for impact management practice”). Waiting and watching and drawing on “best-in-class” is Apollo’s way, Hall says.
“We’re third- or fourth-movers. We know we’re not first movers,” she says. “For our impact strategy to be successful, we have to draw on what’s been done in the industry.”
A significant marker: compensation will be tied to impact for the co-leaders of the Apollo Impact team, Marc Becker, a 24-year firm veteran, and Joanna Reiss, who joined last year. Their “carried interest” will be tied to key performance indicators developed in part by the new advisory committee (see, “Impact Carry: A carrot-based approach to boosting the impact of impact investments”).
The advisory committee itself is another effort to establish credibility. “There is some skepticism about why is Apollo doing it, and why are they doing it now,” Hall acknowledges.
In January, Apollo’s billionaire founder, Leon Black, said he would step down as CEO after an internal investigation into his ties to the disgraced late financier Jeffrey Epstein. The investigation found no evidence Black was involved in Epstein’s criminal activities, but did show that Black paid Epstein $158 million in fees, loaned him more than $30 million and donated $10 million to his charity.
More broadly, a 2019 report from the Private Equity Stakeholder Project charged that Apollo “has a history of investing in businesses that prey on low and moderate income people,” citing investments such as OneMain Financial, one of the nation’s largest subprime installment lenders; Apollo Education, which owns for-profit University of Phoenix; and Inspire Communities, a developer and owner of manufactured housing communities.
Last year, Apollo for the first time made public its annual ESG report, which it had prepared internally for more than a decade. “We believe the firm must not just be open to change, but must also seize the opportunity to make positive change happen,” the firm’s co-presidents write in an introduction.
Agents of impact
Members of the advisory board will have the opportunity to engage Apollo across funds and asset classes. Maurice Jones, most recently CEO of Local Initiatives Support Corp. and now head of the OneTen, a coalition aimed at hiring and promoting one million Black Americans over 10 years, is bringing Apollo collaborations and partnership in community development expertise, “not an area the firm as a whole has done very much in,” Hall says.
Kimberlee Cornett, who directs impact investing at the Robert Wood Johnson Foundation, is a longtime practitioner of “blended finance,” a powerful tool that Apollo has not used, Hall says. Apollo itself is seeking financial outperformance, but could partner with philanthropic or other providers of catalytic capital to achieve an impact goal. “We are not looking to be concessionary in what we do, but there could be opportunities to partner with catalytic capital,” Hall said.
Hall recruited David Luan, an artificial-intelligence expert and director at Google Research to help the firm navigate what some call Industry 4.0, using AI to both “create efficiencies and maximize on impact.”
Two members are explicitly gender-lens investors, from different backgrounds. Women of the World Endowment’s Patience Marime-Ball brings development-finance expertise from the International Finance Corp., while Golden Seeds’ Mindy Posoff is expert in public-markets structuring.
Other members include: Julie Abrams of Impact Investing Analytics; Iris Choi of Floodgate; Impact Experience’s Jenna Nicholas; Megan O’Connor of Kaplan Test Prep; Beeck Center‘s Sonal Shah and David Thomas of Morehouse College.
“The more exposure folks at Apollo get to best-in-class impact approaches, the better we will be at it in our platform,” Hall said. She said Apollo Impact is starting with private-equity, but that Apollo could expand the platform to credit, real-estate and other asset classes.
“The more successful our private-equity impact strategy is, the better it’s going to be for demonstrating to other parts of the firm that we can generate impact and make profits.”