Temasek, the $214bn Singapore state-backed investment company, has made a $500m allocation to Leapfrog Investments, in a partnership that marks the largest single commitment to a specialist impact investment manager.
Interest among institutional investors is growing in strategies that combine attractive financial returns with specific social or environmental goals. So-called “impact investment” assets reached an estimated $715bn at the end of 2019, according to the Global Impact Investing Network, an industry body. Temasek’s investment represents the single biggest commitment to date in a specialist impact manager, according to GIIN.
“There is an urgent need to address the critical social and environmental challenges that the world is facing. We believe in the potential of impact investing to unlock the capital to meet these challenges,” said Benoit Valentin, Temasek’s head of impact investing.
Temasek hopes its commitment will encourage other large institutional investors to move into impact investing. It also intends to make additional allocations to other specialist impact investing managers.
The $500m committed by Temasek takes the total capital raised by LeapFrog since it was founded in 2007 to more than $2bn.
LeapFrog’s early focus was on financial services and it later expanded into healthcare. It owns WorldRemit, a fast-growing cross-border digital payments company, and Goodlife, one of the largest pharmacy chains and healthcare providers in Africa.
LeapFrog-backed companies employ more than 130,000 people and provide healthcare or financial services to 212m customers.
“About 4bn people globally, half of humanity, does not yet have access to high quality healthcare or the financial tools which they need to prosper. Our ambition is to reach 1bn customers by the 2030s,” said Andy Kuper, LeapFrog’s chief executive.
LeapFrog will mainly use the Temasek money as cornerstone investments to establish new funds. Temasek will also acquire a minority stake in LeapFrog.
Kuper said growing numbers of institutional investors were now being drawn to the combination of “profit with purpose” offered by impact strategies.
“The dam has burst and I expect to see more institutional investors making commitments of at least $1bn to impact investing. I don’t expect this record to stand for very long,” he said.
Prudential Financial, the US insurance group, has invested more than $2bn in impact investments, focusing some of the capital on reviving the area around its headquarters in Newark, New Jersey.
Zurich Insurance has built a $5.4bn impact investment portfolio that includes green bonds, social and sustainability bonds, private equity funds active in areas such as financial inclusion and clean technology, as well as loans for infrastructure projects such as wind or solar farms.
TPG, the Texas-based private equity manager, has raised $5bn for impact investments focused on education, financial inclusion, healthcare and clean energy.
KKR, the New York-listed private equity manager, raised $1.3bn last year for its first global impact fund which will focus on climate change, water and sanitation, workforce development and infrastructure.
“Leading investors are prioritising measurable impact alongside financial returns, demonstrating that each can enhance the other,” said Amit Bouri, chief executive of Global Impact Investing Network.
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