Purpose Capital edged closer to completing phase one of its impact investing goals in NZ last week after a further allocation to local solar electricity farmer, Lodestone Energy.
A syndicate led by Purpose, along with a group of other investors including Fisher Funds (via Jarden Principal Investments), Pathfinder and the Accident Compensation Corporation (ACC) fund, raised $55 million for the Lodestone ‘series C’ round.
In total, the Purpose consortium contributed $7.4 million to the capital-raise, bringing its exposure to the solar star to $17.4 million.
Bill Murphy, Purpose founder, said reaching series C stage – a private equity growth milestone – vindicates the manager’s early faith in Lodestone as an investment capable of hitting the dual-mandate of financial returns and measurable social impact.
Lodestone is the fifth asset in the fund in a portfolio that should ultimately house seven underlying companies.
Since inception in 2019, Murphy said Purpose had screened more than 500 NZ firms looking for the magic combination of long-term profit-maker and world-improver.
If progress has been slower than anticipated in sourcing investments, he said the fund is confident of finding a couple more suitable companies before closing proper (it is open to co-investments only now).
Launched during a burst of enthusiasm that impact investing would take off in NZ in line with global trends, Purpose, however, is still something of an anomaly.
At almost $22 million under management, the fund bills itself as “the largest” private impact investment vehicle in NZ. (Including contributions from syndicate investors outside the fund, Purpose has corralled about $43 million into the portfolio companies.)
But the manager doesn’t have much competition. The Impact Enterprise Fund launched in NZ – a joint venture between Ākina Foundation, New Ground Capital and Impact Ventures – was first to market in 2018, raising $8 million in its sole effort to date.
The Impact Investing Network NZ lists 13 funds including two ACC specialist portfolios and several dedicated to social housing.
Otherwise, a handful of KiwiSaver schemes have made ad hoc impact investments (notably in social housing) while several community trusts – such as Foundation North have established dedicated in-house portfolios.
BayTrust, Wel Energy Trust, TECT and Warehouse founder, Stephen Tindall (through the Tindall Foundation and the K1W1 fund) are the main investors in Purpose.
“I’m gobsmacked we’re not seeing at least six other impact funds [similar to Purpose] now,” Murphy said.
Last year the Global Impact Investing Network (GIIN) counted more than 300 specialist managers with collective assets of US$371 billion.
Most of the global impact fund flows came from institutional investors such as pension funds and insurers, the 2023 GIIN report found.
Murphy said Purpose had struggled to engage with NZ institutional investors for the group’s first fund for various reasons including scale.
“Our second fund, which will be significantly larger, will need institutional support,” he said.
The group is currently seeking expressions of interest for the follow-up impact fund, slated to launch next year.