LGT Capital closes first dedicated impact fund on USD 550m

LGT has made around USD 1bn in impact investments to date, according to a statement, but Crown Impact is its first dedicated fund for the strategy. The fund will target the same returns as LGT’s other private equity strategies.

Crown Impact is an Article 9 fund under the SFDR and will focus on investment themes of climate action, including growth and healthcare.

Managing partner Tycho Sneyers told Unquote that the GP started working on the strategy around two years ago, with a “very swift” first close held a year ago, around two months after the launch of the fund.’

Sneyers joined LGT in 2001 and has led its ESG activities since 2002, according to the GP’s website. He serves as a member of the board of directors of the UN PRI. “We have been active in ESG for over 20 years now, and it is very important that we include more and more outcome orientation in what we do,” Sneyers told Unquote. “ESG was initially more about process orientation, but it has shifted since 2015, and has become significantly more important. Impact investing is a very good investment practice of putting outcome orientation into practice.”

Syners told Unquote that investor demand and impact market maturity made now the right time to implement the strategy. “We are trying to offer a best-in-class holistic approach for impact investing with this fund,” he said. “So there also has to be a breadth of opportunities to do that. Our clients want an impact fund covering many areas, and the market had to reach a certain breadth of opportunities to make that possible.”

Impact fundraising saw a record year in 2021, with the trend likely to continue into 2022, as reported by Unquote. The European market has seen a flurry of impact-related activity, with existing impact investors such as Trill Impact launching a venture strategy, as well as new impact funds-of-funds from managers including Golding Capital Partners, and dedicated impact funds launched by generalist investors such as UK-headquartered Apax Partners.

Investors
The fund is backed by pension funds, insurance companies, endowments and family offices across Europe, Latin America, Asia and Australia, according to a statement.

Snsyer told Unquote that pension funds make up the majority of the LP base, with the most represented countries in the LP base being Switzerland, the Nordics, the US and Japan. Around 80% of the LP base is made up of existing investors, with 20% new, he added.

Investments
Crown Impact will make co-investments alongside conventional and impact managers, as well as impact primary and secondary fund investments. Around 70% of the fund is expected to be dedicated to co-investments. The fund is around 25% committed to date, Sneyers said.

The fund will deploy around USD 10m for each fund investment, Sneyers told Unquote. “We do not focus primarily on the size of the underlying funds, but rather on the impact – it’s about how the managers achieve their impact and what they are aiming to achieve,” he said. “So the funds we commit to will range from small to larger ones. We tend to focus on buyout and late-stage growth opportunities, although we do not exclude anything. We always consider emerging managers, and we will consider them also for this strategy.”

Crown Impact expects to deploy USD 5m-20m per co-investment, making predominantly buyout and growth deals. “The company size is not really a primary consideration, since we are trying to build a diversified portfolio, so the size range will vary,” Sneyers said. “We do focus on more mature businesses so less on VC.”

The portfolio will be more diversified than a typical private equity fund, he added, given that Crown Impact is expected to invest in more than 30 companies. The fund has a global focus, although investments will mainly be made in companies in North America and Europe, followed by China and India, Sneyers added. “This is driven by the availability of opportunities and where we see the best risk-return profiles,” he said.

Crown Impact is seeing a strong pipeline in its themes of climate action, inclusive growth and healthcare, according to Sneyers. “The pipeline looks extremely attractive and will continue to grow,” he told Unquote. “Society will need to keep on addressing impact themes, so more and more PE deals will become impactful, with more impact funds and more mainstream managers doing these deals as they make economic sense. Consumer preferences and regulatory initiatives will push the world towards more sustainable outcomes.”

People
LGT Capital Partners – Tycho Sneyers, Ivan Vercoutère (managing partners).

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