For impact investing to make a dent in intractable environmental or social problems, it has to evolve into a mainstream option that high-net-worth investors trust can deliver competitive returns, while making a quantifiable difference. It’s not mainstream yet. But The Rise Fund, a social-impact private-equity fund managed by alternative-asset firm TPG’s TPG Growth, is a closely watched step in that direction because of the potential $2 billion size of the fund and the players involved.
One of those players is UBS. The Swiss bank’s wealth management units, with a combined $2.2 trillion in assets under management, announced Monday that they had raised $325 million for The Rise Fund from their ultra-high-net investors in Europe, the Americas and Asia, marking the largest investment in the fund to date. “We found in interacting with our clients around the world a current and increasing interest in sustainable and impact investing,” says Jason Chandler, head of investment platforms and solutions at UBS Wealth Management Americas.
The Rise Fund, co-founded late last year by Bill McGlashan, TPG Growth’s founder and managing partner, with activist Bono, U2’s lead singer, and Jeff Skoll, a film producer and entrepreneur, is financing growing companies globally that address seven environmental and social sectors that are among the United Nations’ 17 sustainable development goals. The sectors range from health care to energy to agriculture. So far the private-equity fund has invested $190 million in EVERFI, a digital-education firm, $50 million in Dodla Dairy, a fresh dairy company serving South India, and an undisclosed sum in Brava, an “internet of things” appliance maker. The terms of the fund haven’t been disclosed.
The UBS investment is the wealth manager’s first step in meeting a stated commitment of raising $5 billion over five years for impact investments that tackle the UN goals. UBS says the potential for private wealth to play a bigger role in solving the world’s social and environmental problems is often ignored. But an investment of billions can go a long way towards creating the infrastructure needed to make impact investing a feasible part of an investment portfolio.
“Getting a critical size, where people on a more consistent basis can allocate a portion of their portfolio to impact investing, is part and parcel of it growing exponentially,” says Mark Haefele, global chief investment officer at UBS Wealth Management.
This latest fundraising brings UBS Wealth Management’s impact investing totals to about $1 billion so far, including the $471 million UBS Oncology Impact Fund, raised last year by investors in Europe and Asia, and the $110 million Rethink Impact fund, a venture-capital fund focused on gender diverse technology companies raised by UBS Americas clients in March. Haefele can’t say how much more UBS will raise this year but he’s confident the firm will meet the $5 billion goal based on investor demand.
“The world is moving in this direction,” he says, noting that millennial investors are twice as likely to pull out of an investment they don’t view as sustainable, as found in a June UBS study. UBS’s financial advisors and existing clients have become more familiar with impact investing, Haefele adds, so “we’re able to much more quickly talk to a broader client base.”
The Rise Fund was attractive to investors interested in impact investing, but also in private equity generally, especially given TPG Growth’s role. Another plus is the fund’s promise to measure the impact of its environmental and social gains “from underwriting to exit,” according to the fund. This impact-assessment methodology—which The Rise Fund calls “evidence-based impact investing”—was created with The Bridgespan Group, a global nonprofit strategic advisor for philanthropists and mission-driven organizations.
McGlashan, also the fund’s CEO, says both The Rise Fund and UBS “believe that commerce has a powerful role to play in catalyzing positive social and environmental outcomes.” Investors will watch closely to see whether those goals can be reached alongside positive investment returns.