Legal & General Capital has invested in the new female-led impact investment advisory firm which will fund projects across clean energy and renewables, sustainable mobility, health, and water and sanitation.
ImpactA Global (ImpactA) has been launched to provide debt financing to sustainable infrastructure projects in emerging markets.
The announcement was made by alternative asset platform Legal & General Capital (LGC) , part of the UK’s insurance and financial services group Legal & General, earlier this week. LGC said it had invested an undisclosed sum in the ImpactA and according to its CEO Laura Mason is now “a significant minority stakeholder”.
ImpactA will fund projects across the four main sectors of clean energy and renewables, sustainable mobility, health, and water and sanitation. The firm said it would seek to solve the funding gaps and catalyse investment into transformational projects that have the potential to drive climate transition and address inequality in the Global South, primarily in Latin America, Africa and South Asia.
Isabella da Costa Mendes, co-CEO and co-founder of ImpactA, said the focus would be on projects that offered an attractive risk/return profile, adding “and sometimes using certain structural risk mitigants we can create attractive returns.”
ImpactA would not comment on current fundraising but da Costa Mendes said her team believed that their strategy would be “appealing to institutional investors looking for long-term, low-volatility exposure to emerging markets in a resilient asset class and delivering measurable impact at the same time”.
Through the partnership, Legal & General Capital said it would support ImpactA in building its business and that the investment was closely aligned with its own strategy to create positive environmental and socio-economic impact as part of its General Partners (GP) Investing Programme.
Responding to questions from Impact Investor, John Alker, head of sustainability for Legal & General Capital, said this included investment in sectors such as clean energy, affordable housing and urban regeneration.
He added: “However, crucially, we do not wish to ‘cherry pick’ positive impact, but drive positive impact across all investments, and identify, manage and mitigate negative ESHG [environmental, social, health and governance] risks where these occur.”
Driving impact in infrastructure
Impact Investor asked ImpactA how the company planned to identify projects and measure the impact of those it financed.
Audrey Caulliez-Louis, partner and impact advisory chair for the company, said all the investments considered would need to demonstrate profitability, financial sustainability as well as a positive impact across all the assessed criteria in the company’s impact scorecard.
She said: “For a project in clean energy for instance, one of the underlying KPIs would be to unlock X MW of renewable energy in a country to assist them in meeting their country targets or for the health sector, it could be to provide X number of beds to isolated communities. We also have a list of exclusions/red flag transactions we will not consider for suitable investments.”
Caulliez-Louis said ImpactA employed its own proprietary methodology, which defined how the company incorporates impact alongside its investment, due diligence and structuring processes. She said the company had also defined its own theory of change, broad reach targets and KPIs, sectorial KPIs for its four main investmentsectors and had designed a proprietary scorecard, which she said was “very aligned with some of the development finance institutions”.
Caulliez-Louis explained the scorecard would assess the intensity of the impact, including how many people are impacted and how far-reaching or duplicable the impact is; the sustainability of the impact in terms of environmental/climate action, including the reduction in CO2 emissions, and the inclusivity of the impact, using measures such as diversity and inclusion, whether it reaches the poorest in society and gender equity.
Impact focus
Asked about Legal & General Capital’s impact investment strategy, Alker said the company had not set aside a target amount for impact investments because this risked “a siloed approach where positive impact is only sought from a narrow minority of investments, with the vast majority of everything else being ‘BAU’ [business as usual]”.
He added: “Instead we seek to be impact-led across all our investments, which are driven by the identification of need across geographies and sectors. We believe that by helping to serve society’s unmet need for investment, there is commercial opportunity.”
Alker explained that a new sustainability framework was being rolled out across the platform to provide “greater structure and rigour to the integration of impact, in addition to ESHG, within our investment process”.
He said: “We have a number of high-level impact goals and seek to identify and influence alignment of investments with one or more of those goals, appraising both investment strategies and underlying investments for positive impact, including intentionality, additionality etc., based on industry best practice. We also identify ESG risk and ways to manage and mitigate this.”
Through its GP Investing Programme, Legal & General Capital has also invested in other partnerships, including with NTR, a renewable energy specialist, to finance the construction and operation of renewable energy infrastructure such as wind and solar farms.
