TPG takes on impact investing but hesitates on disclosure

A year ago, Agri Investor asked Joy Basu, then lead of food and agriculture investments for TPG’s The Rise Fund, what effect investors’ growing focus on ESG would have on competition for impact investments. She replied that the firm hoped its own efforts would help catalyze greater interest in such assets.

In a recent interview with Bloomberg, The Rise Fund chief executive and co-founder Bill McGlashan made a similar point. In fact, he argued, the fund had positioned itself so firmly in that market that in many cases it was now getting a lower price for the assets it covets.

“These entrepreneurs want to be part of ‘The Rise Fund movement’, if you will,” he said. Key to that legitimacy, in his view, was The Rise Fund’s 18-month work with non-profit Bridgespan Group and more than 80 organizations to establish a set of metrics that “credibly” measure social and environmental impact. The fund’s pledge that the results – being carried out through an entity he referred to as “Rise Labs” – would be shared with other investors had been key to attracting LPs to the vehicle, he noted.

Asked to provide an example, McGlashan highlighted that the fund’s purchase of a $50 million stake in India’s Dodla Dairy, sealed in May 2017, had led to a 50 percent income uplift for the 280,000 smallholder farmers that supply the company. Such impact had been validated by third-party data, he said, in a report audited by KPMG and “published” three weeks prior.

Given the firm’s clear desire for leadership in the space, Agri Investor was somewhat disappointed to subsequently learn that the Dodla Dairy impact report – shared with investors – is not available to the public and that the ‘Rise Labs’ initiative is “actually a not-yet launched organization,” according to The Rise Fund head of communications Frank Thomas.

Thomas told Agri Investor the Fund is looking at “bespoke” company-centric metrics tied to those businesses’ products or services, pointing out TPG is not ready “to open the door to the proprietary data for individual companies.” He also highlighted the UN’s Sustainable Development Goals as being part of that determination, but declined to elaborate on how individual investments would contribute to the broad societal aims of the SDGs.

It is understandable that The Rise Fund would be reluctant to share not-yet-finalized impact metrics while it is in the process of sourcing, or even carrying out, its impact investments. And to be fair to TPG, not all the Fund’s LPs feel it has a duty to share those metrics. For example, a source at an LP of the Rise Fund said that, while the fund’s potential for social impact was viewed as positive, diversification and access to the strength of TPG’s underwriting and investment teams were more important factors in its decision to commit.

As such, the source said, that LP was not among those that made sharing The Rise Fund’s social impact metrics a condition of its commitment and its investment staff do not necessarily feel it important that TPG publicly share anything the firm considers “their secret sauce.”

Be that as it may, 80 percent of respondents to a survey released in early June agreed that “greater transparency from impact investors on their impact strategy and results” could help mitigate growing fears about “mission drift” and “impact-washing”, as the impact-investing market continues to incorporate large, conventional investors like TPG.

Agriculture attracts more impact investors than any other sector. As ESG considerations continue to climb LPs’ agendas, it is clear a key challenge in the market will be striking an appropriate balance between the discretion necessary to maintain a competitive advantage and the transparency the ‘impact investing’ label requires.

Given its stated ambition to help set standards for the burgeoning market, Agri Investor hopes The Rise Fund can embrace the transparency necessary to rise to the challenge sooner rather than later.

PS: In an email on Tuesday, Thomas told Agri Investor that the Rise Labs initiative would launch later this year.

“The Rise Fund is and has always been committed to rigorous impact evaluation, and will continue to be through its work with The Bridgespan Group and the soon-to-be launched Rise Labs. As we have in the past, we will continue to share what we learn with stakeholders as we refine and enhance our own approach. Our focus remains on creating effective tools to predict, underwrite, measure and track impact,” wrote Thomas.

Write to the author at chris.j@peimedia.com