SINGAPORE – Singapore’s Temasek Holdings believe that impact investing has reached a turning point. The coronavirus pandemic shows deep social imbalances that have increased the need for such forms of investment.
Such investments, made to generate positive, measurable social and environmental impacts and financial returns, rose from $ 502 billion in the previous year to $ 715 billion in 2019, the Global Impact Investing Network estimated in a survey.
This month, Temasek, one of the world’s largest government investors, announced a $ 500 million allocation to Leapfrog Investments focused on Asia and Africa.
“Our goal is to be a catalyst to accelerate growth,” said Benoit Valentin, head of impact investing for the company, in an interview with Reuters.
“I think that in five years, every single large private equity firm would have its own impact vehicle.”
Leapfrog invests in financial services and healthcare in emerging markets. Two years ago, Temasek’s philanthropic arm founded ABC World Asia, a private equity fund for such investments.
“We believe that impact investing is at a turning point,” added Valentin, who is based in London.
Temasek, who is also planning a stake in Leapfrog, is in talks to tie up money with other fund investors to bolster its presence.
“We are already in due diligence with two funds,” said Valentin, one focused on India while the other had a bigger impact. “We hired others for the following years.”
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Temasek is among the few major government investors who have made a big push in a category that has attracted buyout funds like Blackstone, TPG and KKR.
Early market entrants showed that it was possible to “achieve risk-adjusted PE-like returns, not necessarily 25 percent or more, but rather mid-teen to over 20-year-old returns,” said Valentin.
“We don’t see this as a dilution of our overall returns,” said the 20-year-old investment veteran, referring to internal rate of return, a measure of actual profit.
It is important to set clear standards that are strictly selected to sustain growth, he added. Temasek is working with a third party to review its impact investments, and Leapfrog and ABC have also conducted third party reviews.
“At some point I believe that some kind of retail money will flow in,” said Valentin.
