Impact growth investing continues to grow in investor interest. Market research firm Brainy Insights predict the size of this market will more than double to $10bn over the next decade. This strong growth is not surprisingly given strong drivers such as government policy, more robust measurement tools and institutional investors increasing allocations.

For private equity investors, there is a clear attraction – aligning their return and values objectives whilst also supporting businesses seeking to make a positive social and/or environmental impact. This is particularly relevant to pension plan managers with private equity, an important component in endgame planning and potentially delivering superior long-term returns.

The attractions may not end there however. Diversification is often an objective and impact growth equity, typically with a focus on small to mid-cap stocks, can diversify portfolios within larger equity portfolios with a large-cap bias. Longer holding periods typical within private equity can provide further diversification benefits.

However, there is an issue impeding the growth potential of this investment area. There exists a fund gap for these businesses, specifically during their growth or scale- up phases.

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