Impact through private equity

What makes private equity one of the key drivers for sustainable transformation? What steps could investors take to drive impact through private equity? Read our views.

It is estimated that US$7tn1 of capital will need to be invested each year between now and 2030 to help the current global economy transform into a more sustainable one. The bulk of that capital is expected to come from the private sector.

Private equity, by its nature, is well-suited to be one of the drivers for this transformation. For one, private equity strategies usually span at least a decade, which makes them suitable for driving sustainable outcomes that take a long time to realize. Ownership structures of private equity also enable strong alignment between the owners of a business and management to drive strategy towards the intended impact and financial outcome.

But perhaps most importantly, private equity has an excellent track record for developing innovative solutions or supporting businesses that do so. Innovation is crucial to disrupt the status quo to solve today’s challenges.

These factors contribute to our belief that investors can drive impact through private equity. What steps could investors take to achieve this?

First, it’s important to define impact investing. When referring to sustainable investing, climate change often comes to mind first. However, the UN’s Sustainable Development Goals (SDGs) identify 17 key goals to transform our world that include other societal issues that require capital and expertise. These include, amongst others, affordable healthcare, education, and access to financial services.

Second, consider these goals and analyse them against themes that are most established within private equity, as well as those that will see increasing focus. It at this intersection that we believe investors will find opportunities. And it is within these private equity impact investing opportunities that investors could generate positive impact outcomes at attractive financial returns.

Kristi Leung
Director, BlackRock Private Equity Partners Asia-Pacific