Investors are increasingly finding impact investing as risk-adjusted and return-driven just as any other traditional approach.
Saima Rehman, investment officer, Private Equity & Funds at IFC, said, during the panel discussion
at the Asia PE-VC Summit 2021, the firm, at a minimum, invests in GPs that bring environmental, social, and governance (ESG) criteria “to the heart of their operations.”
“What we have found over decades of investing and working with good GPs,” she said, is that the best GPs use ESG and impact investing positively as “a lever for value creation” and “a tool for managing underlying risks.”
IFC, a member of the World Bank, has committed a record $31.5 billion to private companies and financial institutions in developing countries in the fiscal year 2021.
Saima was joined by Fernanda Lim, partner at London-based impact investment firm LeapFrog Investments and Tan Shao Ming, chief investment officer at ABC World Asia at a panel discussion titled Impact investing turns mainstream: What’s changing and what are the implications?
ABC World Asia CIO Tan Shao Ming said, “private equity is known to be hard-nosed and objective-driven. However, that can be seen as a strength when it comes to impact investing because we need the same pragmatism, the same level of rigour and discipline in driving companies to meet the impact goals.”
ABC World Asia is investing through its inaugural $297.8 million, 2019-vintage vehicle focusing on China, SE Asia, and South Asia. It was set up by Temasek’s philanthropic arm Temasek Trust in May 2019.
But challenges exist when investors are trying to generate market-rate returns by identifying high-growth businesses that also care about good deeds, especially against a set of evaluation metrics that are yet to be standardised.
“It’s growth on top of growth on top of growth,” said Lim. “We do have constraints. And the main one is related to our purpose, our impact, and the ESG filters that we apply… It is a natural challenge.” With about $2 billion in committed capital from LPs like Temasek, LeapFrog has built a portfolio of companies providing healthcare and financial products across 35 countries in Asia and Africa.