Financial inclusion is the leading impact theme for impact private debt funds, attracting nearly half of all capital commitments, according to the latest impact report by Phenix Capital
Phenix Capital Group, the Amsterdam-based impact investment consultant, published its impact report on private debt last week, which revealed that more than €43bn has been committed to private debt funds since 2015.
The report is based on data from Phenix Capital’s Impact Database, which includes impact investment funds from across the world.
Out of the more than 2050 impact funds listed on the database, 319 are private debt funds, the report says, making private debt the fourth most targeted asset class by impact fund managers, and the third most targeted asset class by impact funds fundraising today.
The report revealed that there are 181 private debt asset managers listed on the database today, of a total of more than 800 impact asset managers. Of these, 130 are currently fundraising across 179 private debt funds.
Historically, private debt funds have targeted emerging markets (68.87%), developed markets (25.79%) and global markets (5.35%).
In 2021, Southern Africa (11%) was the most popular region for private debt followed by North America, global markets and West Africa in joint second place at 7%, and Western Europe in third place at 6%.
Financial inclusion and SDG 1
According to the report, financial inclusion is the leading impact theme for private debt funds, attracting nearly €20bn in historical capital commitments, with current fundraising targets standing at €14bn.
On a historical basis, this is followed by capital commitments of €13bn in gender lens investments, €10bn in sustainable agriculture and farming and €9bn in transition to renewable energy.
The report shows that SDG 1 (no poverty) is historically, and currently, the most targeted SDG with some €24bn in historical capital commitments. Currrently, it is followed by SDG 7 (affordable and clean energy) and SDG 2 (zero hunger).
The report also includes interviews with three asset managers, Symbiotics, Privium Fund Management and Community Investment Management.
Commenting on the opportunities and outlook for private debt, Jenny Overman, associate director at Privium, said: “When I first looked into the private debt space, I was blown away by the number of projects and options available. There is something to fit every investment mission and vision. Post-COVID, I think the sector has learned a lot about efficient deployment, deal sourcing, debt servicing, communication and KYC (Know Your Client), which will benefit the quality and healthy growth of the sector.”
Jacob Haar, managing partner at Community Investment Management, said: “2022 is heading toward a more challenging economic environment with inflationary pressures, higher interest rates, geopolitical uncertainty, and the ongoing economic dislocation from the pandemic. While macroeconomic forces impact all asset classes, many private debt investments should fare well during these challenging times.”
He added that private debt tended to be more resilient to market volatility: “This climate will reveal the differences between various private debt opportunities and managers.”
David Grimaud, head of asset management for Symbiotics, added: “The trend that we have seen, not only in 2022 but over recent years, is the diversification of impact investing within the private debt market, with investors seeking to reach broader impact goals. Financial inclusion was previously a primary impact focus for a number of investors. Now, we are seeing greater demand for SDG 5, for example, the goal to achieve gender equality and empower all women and girls. Sustainable development goals linked to climate change remain a driving force, and we are seeing sustained interest in those wishing to target climate-related sustainable development goals and expect this to continue going forward.”