UN SDG 3 (Good Health & Wellbeing) was the top investment pick of private equity impact investment managers last year, followed by SDG 2 (Zero Hunger) and SDG 9 (Industry, Innovation and Infrastructure), Amsterdam-based investment consultancy Phenix Capital said in a new report. A year ago, Zero Hunger had been in third place.
The report looks at trends among impact private equity funds included in the Phenix Capital’s database. It shows private equity funds continues to be the “go-to strategy” for impact investing, making up 53% of the database.
According to the report, the past decade saw a 219% jump in the number of private equity impact funds to a total of 1459. There are currently 712 private equity impact managers, who have raised a combined €214bn in capital.
The majority (430) of the private equity funds in the database targeting Good Health & Wellbeing as their core investment theme are based in Europe, with 341 funds located in North America and 206 funds headquartered in Asia.
Of all funds dedicated to Good Health & Wellbeing, 281 focus on access to healthcare, while 286 funds are targeting unmet medical needs. Fifty funds are focused on the ageing population, with 156 dedicated to wellbeing & mental health.
While there were a combined 9,222 fund commitments to SDGs 3, 9 and 2, Phenix highlighted the lack of investor commitment to natural capital. There were only 506 fund commitments last year to SDG 14 (Life Below Water) and just 338 to SDG 15 (Life on Land).
Phenix also looked at commitments to SDG by investor type, which showed that Innovation & Infrastructure (SDG 9) was a top pick for pension funds and family offices, with banks favouring Zero Hunger (SDG 2) and insurance companies targeting SDG 1 (No Poverty).
Development finance institutions, which favoured No Poverty followed by Zero Hunger, were the only investor type to focus on Decent Work & Economic Growth (SDG 8), according to Phenix.
The momentum for private equity fund launches has slowed in recent years due to poor macroeconomic conditions, with the number of private equity impact funds growing by just 0.34% last year, according to the report. However, the report notes that, in general, investors seem to be returning to private equity strategies following the recent slowdown.
Although recent interest rate cuts in Europe and the US has led to a more favourable dealmaking environment, Phenix pointed out that the reverberations of the Trump administration on impact funds “have yet to be felt.”
The US President’s championing of the oil and gas industry, and his recent withdrawals from both the World Health Organization and the Paris climate accords via executive order could negatively impact investments in that space, Phenix said in the report.