The historical advantage of simply carving out a business that a corporation undervalued is gone. Increased competition and complexity mean that without a critical eye and deep expertise, carve-outs are now just as likely to fail as they are to succeed, with average returns declining over the last decade.
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.
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.
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.