Stockholm (NordSIP) – For a decade now, investment consultant Phenix Capital has continuously monitored the evolution of the impact fund universe, striving to equip asset owners and managers with the insights, tools, and opportunities necessary to catalyse investments in the space. On 30 June, Phenix released their latest Impact Report on Resilient Economies. The consultants provide additional insights this time, having developed new data sets of outcome-based investable themes mapped against the Sustainable Development Goals (SDGs). Worryingly, the new report finds that capital flow towards resilient economies has yet to reach pre-pandemic levels and has not grown in its targeted geographies.
Selective Deployment of Impact Funds
According to the report, out of 2.050 funds listed on the Phenix Impact Database, 1.105 currently contribute to building resilient economies, and EUR 232 billion has been committed towards these funds since 2015. Institutional funds allocators have been favouring private equity, real assets, and private debt impact funds, raising more than EUR 45 billion in each asset class on average since 2015. Currently, around EUR 14 billion are being fundraised by resilient economy-focused funds, split evenly between the three main asset classes.
Capital from institutional investors is deployed predominantly in three areas: providing access to healthcare services (SDG 3), financial inclusion (SDG 1), and affordable housing (SDG 11). This is understandable, given that these sectors are known to offer high return targets, supporting impact funds’ dual mandate. Other SDGs, meanwhile, seem to attract less attention and capital. Since 2015, only EUR 5 billion has gone into funds providing access to food (SDG 2) and peace-building economies (SDG 16), for instance. Among targeted geographical areas, only the Middle East and Africa have experienced an increased exposure at the expense of LATAM-focused funds.
Judging by the target size of currently open funds, this selective focus on specific SDG and regional opportunities is continuing. One of the conclusions of the report is, thus, that there is a growing need for impact-first investments, such as catalytic capital, blended finance, and philanthropic investments, which could channel money towards key resilient themes currently neglected.
Industry Leaders Insights
For those seeking a more in-depth account of how asset owners and asset managers attempt to align their impact investments with the SDGs, Phenix’s report also features some interviews with industry leaders.
“When I first looked into the private debt space, I was blown away by the number of projects and options available,” shares one of the interviewees, Nina Freudenberg, Director of Impact Investments at Golding Capital Partners, one of Europe’s leading independent asset managers for alternative investments, focusing on the asset classes infrastructure, private credit, private equity, secondaries, and impact. “There is something to fit every investment mission and vision. Post-COVID, I think the sector has learned a lot about efficient deployment, deal sourcing, debt servicing, communication, and KYC, which will benefit the quality and healthy growth of the sector,” she adds.
Whereas Golding Capital Partners have identified a number of different themes, contributing to a resilient global economy by targeting several SDGs, other leading impact managers tend to focus their efforts on a single one. Singapore headquartered Kaizenvest, for instance, has established itself as the only education sector-focused fund manager with private equity and private debt funds across South Asia, Southeast Asia and Sub-Saharan Africa. “SDG 4 [Quality Education] is pivotal and directly influences other SDGs such as Good health and wellbeing, No poverty, Reduced inequalities, Gender Equality, Sustainable cities and communities & Decent work, and economic growth. Our core impact focus directly influences these impact themes,” says Sandeep Aneja, the Founder & Managing Partner of Kaizenvest. “I can see much more consciousness towards ESG/impact investing in Asia. The movement is palpable, and I am excited,” adds Aneja on an optimistic note.
However, these optimistic views are not entirely shared by the report’s authors. There is a lot to be done. “Phenix Capital hopes this report will foster a call to action toward financing a more resilient global economy,” concludes the report.
