Impact and return can go hand in hand
As a bank we fulfil a social role. We have been working with clients for many years to accelerate the transition to sustainability. Since 2018, sustainable investing is the standard within ABN AMRO. This focus translates into continuous innovations. The most recent step in this evolution is the introduction of an impact private equity fund that invests in companies that see it as their mission to achieve a positive impact on people, the environment and society in addition to a healthy financial return.
What is private equity?
Private equity focuses on investments in companies that are not listed on the stock exchange. The investments are made by private equity funds that raise money from various investors. These types of acquisitions are all about creating value. Private equity usually takes controlling stakes in companies. An investment in private equity offers the prospect of structurally higher returns than an investment in listed equities. Another feature of private equity is the long-term view, where listed equities have a quarterly focus. From the moment of purchase, the private equity fund considers the sale of the company with synergy effects. Due to the capital structure, investments in private equity are generally more efficient. Should a portfolio company unexpectedly run into problems, the shareholder, i.e. the private equity fund, can quickly come to the rescue.
The daily practice
For fund manager Jan Stahlberg, making impact is paramount in his work. He takes us through his view of a better world in an interview.
Focus on sustainable products and services
Until now, private equity has only been about strategically and operationally strengthening a company and subsequently selling it at a profit or listing it on the stock exchange. The private equity sector is increasingly investing in sustainable products and services in order to achieve additional financial returns with a positive impact. For more and more fund managers, positive impact is at least as important as financial returns.
Investing in impact
This is good news for sustainable investors for several reasons. Just as with investments in listed sustainable equities, funds and bonds, it helps them to achieve a positive and measurable impact on people, the environment and society through their investments. This is further reinforced through private equity. Private equity investments usually make additional capital available with which the company can intensify its impact activities. Such a financial injection therefore ensures sustainable progress. It is an investment that demonstrably contributes positively to a better world and, at the same time, offers the prospect of a healthy financial return.
Access to private equity
From 1 January, ABN AMRO offers investments in private equity funds from EUR 100,000. Such an investment requires freely disposable assets of at least EUR 5 million*. An investment in private equity can contribute to a balanced investment portfolio with adequate diversification and a healthy risk-return ratio. An investment in private equity funds focuses on the long term, the investments cannot be traded in the interim. Investing in private equity is suitable for experienced investors with a high net worth, a long investment horizon and a high risk profile.
*For customers who already invest in a diversified private equity product (PE Selection fund or secondaries), a limit of EUR 3 million applies.
Measuring the impact
Investors in private equity impact funds receive periodic reports to inform them of the positive impact made by the companies in the fund that achieve a positive and measurable impact for people, the environment and society with their product or service. For example, technologies that save energy in buildings or educational technology that helps disadvantaged children. In this way, investors know exactly what positive difference they are making through their investments.
