SINGAPORE (Reuters) – Temasek Holdings in Singapore believes investment has reached the point of inflection, with the coronavirus pandemic highlighting deep social imbalances that have made more use of such investments.
Such investments, made to measure measurable social and environmental impact, as well as financial output, grew to $ 715 billion in 2019 from $ 502 billion a year earlier, the Global Impact Investment Network assessed in a study.
This month, Temasek, one of the world’s largest state investors, announced a $ 500 million allocation for Leapfrog Investments targeting Asia and Africa, in the single biggest pledge to an impact fund manager .
“Our desire is to be a motivator to accelerate growth,” Benoit Valentin, head of impact investment at the company, told Reuters in an interview.
“I think that, in five years from now, all private equity companies would have their own impact.”
Leapfrog invests in financial services and healthcare in emerging markets. Two years ago, the philanthropic arm of Temasek founded ABC World Asia, a private equity fund for such investments.
“We think investment is influential at the inflection stage,” said Valentin, who is based in London.
Temasek, who also plans to participate in Leapfrog, is in talks to pledge money to other fund investors to boost its presence.
“We are in due diligence with two assets already,” said Valentin, one focused on India while the other had a broader sweep. “We have others in the years to come.”
Temasek is among a handful of major state investors pushing hard in a sector that has attracted buying money such as Blackstone, TPG and KKR.
Early entrants showed that it was possible to “generate risk-modified PE-like outcomes, perhaps not 25% and higher, but mid-teens- to 20-plus-type outcomes,” Valentin said .
“We don’t see this as a weakening of our overall product journey,” said the 20-year veteran, referring to the internal yield rate, a measure of real profits.
It is vital that clear criteria are chosen rigorously to sustain growth, he said. Temasek is working with a third party to review its impact investments and Leapfrog and ABC also had third-party reviews.
“Finally, I believe that some kind of money will flow,” Valentin said.
(Reporting by Anshuman Daga; Editing by Clarence Fernandez)