Impact Investing | January 4, 2022

Where impact funds are looking to deploy $73 billion in dry powder

Dennis Price
ImpactAlpha Editor

Dennis Price

ImpactAlpha, Jan. 4 – Real assets. Emerging markets. Early stage impact tech. The financial data provider Pitchbook picked out nearly 700 active impact investment funds and found $73 billion in unallocated capital – so-called ‘dry powder’ – along with $213 billion in investments outstanding.

To understand where that capital is flowing, Pitchbook tagged the funds with impact categories such as agriculture, education and water, using the IRIS+ framework, as well as by asset classes and geographies. The takeaways: Europeans impact funds like energy. North American funds, healthcare. The largest impact category for the rest of the world: Financial services. Education investment funds trended higher outside of North America and Europe.

Other highlights:

  • Real impact. Real assets like infrastructure and real estate can absorb institutional-sized chunks of capital. Real assets – think hospitals, schools, rural waste systems, energy projects and broadband expansion, along with agriculture and real estate – represented 28.5% of all capital allocated to impact funds. That’s more than double the share of capital raised by real assets funds in private markets more broadly.
  • Emerging markets. African funds raised 7.5% of the capital raised by impact funds since 2006. If that sounds like a pittance, consider that it’s more than six times Africa’s 1.2% share of all private funds. Impact funds represent a quarter of all funds in Africa, versus just 3.5% of all private market funds globally.
  • White spaces. Dozens of impact fund managers have targeted energy, financial services, health and real estate funds. But in many years, no new funds at all have focused on biodiversity, ecosystems or air. Oceans, pollution and employment are also underweighted. Climbing the attention scale: agriculture, climate and diversity and inclusion.