The fund's core belief is that an impact lens can uncover economic returns unavailable to traditional investors. The strategy is not about sacrificing returns, but demonstrating that understanding impact benefits can directly translate into long-term economic outperformance, thereby influencing broader capital allocation.
Related Insights
The 20th-century view of shareholder primacy is flawed. By focusing first on creating wins for all stakeholders—customers, employees, suppliers, and society—companies build a sustainable, beloved enterprise that paradoxically delivers superior returns to shareholders in the long run.
Temasek evaluates global investments on two fronts: financial returns and the strategic insights they generate. This "network effect" allows them to transfer knowledge from one portfolio company to others, enhancing value across their entire ecosystem and justifying investments beyond pure financial metrics.
Beyond traditional energy projects, there's a growing opportunity for large-scale, long-duration capital in "social infrastructure." Mature private education platforms and hospital networks in developing markets are now predictable enough to attract lower-cost capital, creating a new asset class for multi-billion dollar impact funds.
Sir Ronald Cohen critiques the philanthropic model, arguing that relying on donations keeps charitable organizations small, underfunded, and perpetually begging for capital. This prevents them from achieving the scale needed to solve massive problems, a flaw that impact investing aims to correct by creating self-sustaining models.
The current movement towards impact-focused business is not just a trend but a fundamental economic succession. Just as the tech revolution reshaped global industries, the impact revolution is now establishing a new paradigm where companies are valued on their ability to create both profit and positive contributions to society and the planet.
When challenged by an activist investor, Unilever demonstrated that its purpose-driven brands, like Dove and Hellmann's, outperformed others in its portfolio. They used hard KPIs such as pricing power, profitability, and pace of growth to prove that a strong purpose directly contributes to superior financial ROI.
Impact data isn't just a niche metric for investors. Sir Ronald Cohen reframes it as a basic human right. He argues that every employee, consumer, and investor has a right to transparent, standardized information about the good and harm a company creates, moving the conversation from finance to ethics.
Many high-potential businesses with strong social or environmental impact are underdeveloped within large corporations. An impact investing lens helps identify these "trapped" assets, creating proprietary deal flow and unlocking value that traditional investors might overlook, as TPG did with NextTracker inside Flex.
Frame philanthropic efforts not just by direct impact but as a "real-world MBA." Prioritize projects where, even if they fail, you acquire valuable skills and relationships. This heuristic, borrowed from for-profit investing, ensures a personal return on investment and sustained engagement regardless of the outcome.
The emergence of venture capital as a major asset class was unlocked by the new ability to mathematically measure and price risk. Similarly, the current impact investing movement is being driven by our newfound technological capacity (via big data and computing) to quantify a company's social and environmental effects.