Private equity firm TPG collected $2 billion for The Rise Fund, tapping growing demand for impact investing to create the largest pool of its kind.
The fund, which TPG raised in about seven months, surpassed its $1.5 billion target and hit its $2 billion hard cap, or the maximum amount of outside capital allowed by its agreement with investors. TPG employees plan to commit additional money before a final close.
Rise was the brainchild of TPG Growth managing partner Bill McGlashan, the firm’s growth-equity guru who’s had a knack for impact investing since starting a non-profit in Africa in his 20s. McGlashan, 53, recruited high-profile philanthropists, social activists and business leaders to join the founder’s board of the fund, including musician-turned-investor Bono and billionaire Jeff Skoll, who co-founded Rise alongside him. TPG’s billionaire founders David Bonderman and Jim Coulter sit on the board as well.
“This fund comes after a decade of hard work by a lot of very sophisticated people in the investment community, foundations, university endowments and government entities trying to figure out how to drive change using commercial models,” McGlashan said in an interview. “We’re standing on the shoulders of giants here.”
As institutions become more eager to combine financial returns with social and environmental benefit, TPG aims to bring scale and investment rigor to the process. The firm, which has its main offices in San Francisco and Fort Worth, Texas, has brought in consultants, other investors and third-party validators to review and measure its methodology.
The Rise team uses similar metrics as in traditional growth-equity underwriting, such as CAC to LTV, or the cost of acquiring a customer compared to the revenue the customer will generate. The fund also has a minimum threshold for a metric the team calls the impact multiple of money, McGlashan said, declining to specify the level.
The measure of impact is specific to each business. With Dodla Dairy Ltd., an Indian dairy business, Rise tracks the uplift in household income achieved by the farmers who sell their milk. EverFi Inc., which delivers digital courses to educate students and employees on topics such as sexual assault prevention, has measurable savings related to health-care and legal costs, among others.
TPG plans to make its approach public as a “blueprint” for others to follow, McGlashan said. Detailed evaluation, tracking and auditing of such metrics is essential, he said, especially as impact investing can be discredited by those who don’t take it seriously.
“We would do a grave disservice to the industry if we did what a lot of others have done, which is compromise on what it means to deliver impact,” he said. “When you have a soft view on that topic, all it does is reinforce the skepticism that’s frankly justified. This can’t be feel-good investing.”
TPG isn’t the only private equity firm looking to match environmental and social improvement with financial return. Bain Capital closed on $390 million in July for its Bain Capital Double Impact Fund, which focuses on mission-oriented North American companies in the lower middle market. Deval Patrick, the former governor of Massachusetts, oversees the pool.
The Rise fund’s backers include Washington State Investment Board and Swedish pension fund Andra AP-fonden, McGlashan said. New investors to TPG also joined in, including Bank of America Corp., which invested from its balance sheet, and Regents of the University of California and UBS Group AG.
“You can’t be a leader today of anything, whether it’s a company or university or government, and not believe that you have to do the right thing for future generations, the planet we’re on and the people you serve,” said Jagdeep Singh Bachher, the chief investment officer of UC Regents, which committed about $100 million to the Rise fund.
“Getting this right is a responsibility that I think the investors have as much as the manager,” he said.