Temasek sees impact investing at tipping point

SINGAPORE: Temasek Holdings believes that affect investing has reached an inflection level, with the COVID-19 pandemic highlighting deep social imbalances which have intensified the necessity for such types of investments.

Such investments, made to generate constructive, measurable social and environmental affect, in addition to monetary returns, grew to US$715 billion in 2019 from US$502 billion a yr earlier, the International Affect Investing Community estimated in a survey.

This month, Temasek, one of many world's largest state buyers, introduced a US$500 million allocation to Asia and Africa-focused Leapfrog Investments, within the single greatest dedication to an affect fund supervisor.

"Our ambition is to be a catalyst to accelerate the growth," Benoit Valentin, the agency's head of affect investing, informed Reuters in an interview.

"I think that in five years from now, every single big private equity firm would have their own impact vehicle."

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Leapfrog invests in monetary providers and healthcare in rising markets. Two years in the past, Temasek's philanthropic arm arrange ABC World Asia, a non-public fairness fund for such investments.

"We believe impact investing is at an inflection point," Valentin, who relies in London, added.

Temasek, which additionally plans to take a stake in Leapfrog, is in talks to commit cash to different fund buyers to spice up its presence.

"We are in due diligence with two funds already," Valentin mentioned, one targeted on India whereas the opposite had a wider sweep. "We have others lined up for the following years."

Temasek is amongst just a few giant state buyers making a giant push in a class that has attracted buyout funds akin to Blackstone, TPG and KKR.

Early entrants confirmed it was attainable to generate "risk-adjusted PE-like returns, not necessarily 25 per cent and above, but mid-teens to 20s-plus type returns", mentioned Valentin.

"We are not seeing this as a dilution of our overall return journey," mentioned the 20-year funding veteran, referring to the inner fee of return, a measure of precise income.

It's critical to set clear benchmarks rigorously chosen with a purpose to maintain development, he added. Temasek is working with a 3rd celebration to audit its affect investments and Leapfrog and ABC additionally had third-party audits.

"Eventually, I do believe that there will be some sort of retail money flowing," Valentin mentioned.