Opting to make a difference through investment
Brunel Pension Partnership Limited (Brunel) has made a cornerstone $60 million commitment to the Neuberger Berman Private Equity Impact Fund on behalf of four of its LGPS Clients. This investment is not because the LGPS pool has a specific impact mandate, but because these represent excellent investment opportunities. Brunel is committed to actively seeking opportunities that deliver authentic sustainable financial value.
“The fund is ground-breaking in seeking attractive financial returns in lockstep with positive social and environmental impact, having identified investment themes that map to 15 of the 17 UN Sustainable Development Goals (SDGs),” says Richard Fanshawe, Brunel’s Head of Private Markets (pictured second from right). “We fully support this ambitious approach.”
Neuberger Berman (NB) is targeting a high proportion of direct co-investments into underlying companies, complemented by select investments in specialist impact primary funds that Brunel would be unlikely to access alone. NB’s strategy includes encouraging traditional private equity managers to integrate environmental, social and governance (ESG) as a formal part of their process, while supporting specialist impact managers to achieve scale.
Fanshawe notes that finding authentic sustainable investments has become more challenging with the prevalence of green-washing.
“Amit Bouri, Chief Executive of Global Impact Investing Network (GIIN) stated to the Financial Times that ‘as the industry grows, we need to be sure it scales with integrity, ensuring good intentions translate into real impact results,’” he comments.
GIIN recently gathered information from 1,300 impact investors worldwide, putting the size of the impact universe at $502bn. This is double the sum of previous attempts to quantify the value of assets dedicated to Impact.
A framework for targets
Much of the recent growth in impact investing has come from a surge in interest from millennials, as well as the establishment of the SDGs, which have provided a framework for targets.
According to Schroders’ 2018 Global Investor Study, 64% of all investors and 75% of millennials have state that they have increased their sustainable investments within the past five years. Behind these headline figures, the study revealed individual motivations for sustainable investing, highlighting the specific areas where they want fund managers to make a difference.
A due diligence process that digs deeper into non-financial data and reporting is critical as the impact sector grows. This not only presents new challenges but also demands new skills from private equity managers and investors alike.
“It is essential to Brunel to ensure our Clients’ capital does not get diverted into greenwashing strategies purporting to be impactful but with very little substance.”
Digging deeper
Brunel regards Neuberger Berman as a prodigious private equity co-investor, “with a dedicated team of more than 50 professionals around the world. In addition, they impressed us with their approach to impact screening as an additional filter for opportunities which had already met their financial screening criteria.”
“We believe this not only improves overall risk consideration, but hones in on the tangible impact these companies can have. It allows the manager to track relevant reporting key performance indicators to prove their thesis using the Sustainability Accounting Standards Board (SASB) framework,” says Fanshawe. “Brunel obtained attractive terms for our Clients’ aggregate commitments as well as negotiating terms on behalf of the entire LGPS, should any other individual Funds or Pools wish to commit before final close.”