- Daily Zen
Temasek Holdings has agreed to invest $500 million in private equity firm LeapFrog Investments, the largest such commitment in an impact internment company. The $214 billion Singapore state-backed investment company will also gain a minority stake in the company. The partnership will be a multi-fund investment by Temasek to help LeapFrog further its Asia and Africa funds.
Impact or socially responsible investing has gained a lot of attention in recent times with big investment institutions and financial entities such as TPG, KKR and Blackstone showing interest.
“There is an urgent and pressing need to address the critical social and environmental challenges that the world is facing,” said Benoit Valentin, head of impact investing at Temasek.
“We believe in the potential of impact investing to unlock the capital to meet these challenges.”
Temasek’s set up a private equity fund for impact investing two years ago. LeapFrog and its investment process will continue to be managed and controlled by its team of partners.
With the latest funding, LeapFrog has managed to raise over US$2 billion from global institutional investors since it was founded in 2007.
A number of institutions are being drawn to the concept of profit with purpose offered by impact investing opportunities, according to Andy Kuper, chief executive of LeapFrog. “The dam has burst and I expect to see more institutional investors making commitments of at least $1billion to impact investing. I don’t expect this record to stand for very long,” he said. “We will continue to open the gates of the capital markets to purpose-driven businesses,” he added.
Leapfrog provides healthcare and financial services to almost 210 million people, with the majority being low-income consumers. It owns WorldRemit, a fast-growing cross-border digital payments company, and Goodlife, one of the largest pharmacy chains and healthcare providers in Africa.
“About 4 billion people globally, almost half of the world population, do not yet have access to high-quality healthcare or the financial tools which they need to prosper. Our ambition is to reach 1bn customers by 2030,” said Kuper.
Socially responsible investing or ESG assets reached an estimated $715 billion at the end of 2019, according to the Global Impact Investing Network. KKR, the New York-listed private equity manager, raised $1.3 billion last year for its first global impact fund, which will focus on climate change, water, and sanitation, workforce development and infrastructure. “Leading investors are prioritizing measurable impact alongside financial returns, demonstrating that each can enhance the other,” said Amit Bouri, chief executive of Global Impact Investing Network.
Governments and companies are expected to issue $500 billion in green debt in 2021, according to a projection from Swedish bank SEB. The IMF estimates that there are now more than 1,500 equity funds with an explicit sustainability mandate and investors are buying stocks in companies with a good track record on ESG issues.
In the first 11 months of 2020, global borrowers sold $270 billion of green debt. Christopher Flensborg, head of the climate and sustainable finance at SEB, said the asset class is also important for the finance industry. “You’re basically empowering the finance sector to start competing on the climate change issue,” he said. “And if that is not an impact, I don’t know what it is.”