Nuveen closes impact fund on USD 218m

The GP has previously made 12 investments in line with its impact thesis, but via the balance sheet of its parent company, US public pension fund the Teachers Insurance and Annuity Association (TIAA). Nuveen is a wholly owned subsidiary of TIAA.

Nuveen Global Impact Fund held a first close in July 2020 on USD 150m. The vehicle was launched in March 2020, Nuveen's co-head of private markets impact investing Rekha Unnithan told Unquote, meaning that the majority of its fundraising in 2020 was done virtually.

The fund originally had a USD 400m target, which the firm expected to achieve before the onset of the coronavirus pandemic. However, the timing of the launch and subsequent travel restrictions means that the GP revised its target, Unnithan said. "A larger fund would have meant a longer investment period and meeting with more people in person," she said. "We amended the fund to have a USD 300m size after the first close, and while we did not get all the way there, we did not want to keep fundraising for six to eight more months with uncertainty – we want to give our LPs a good vintage. We will do eight deals, not 10, from the fund, but they will be the same type of deals as we had planned."

The fund is an Article 9 fund within the EU's Sustainable Finance Disclosure Regulation (SFDR). It will address the themes of climate change and income inequality, in line with the UN's Sustainable Development Goals, and Nuveen will report on the impact of its portfolio companies.

"Our reporting is the result of a deliberate process and a lot of work, and we take this very seriously," Unnithan told Unquote. "Our thematics are resource efficiency and growth for a just climate thesis. We focus on climate change resilience and mitigation as part of our businesses' operations, looking at ways to improve this and help businesses strive to lower their carbon footprint and climate risk. We also focus on aspects of diversity, equality and inclusion, be it in the employment base, management team, board roles, or customer base."

Given its strong deal pipeline, Nuveen could return to the market for its next fund soon, Unnithan said. "When we will raise the next fund is still to be decided. But if all goes to plan, we will come out with Fund II this year or early next year, once we have built on our early momentum."

Investors
LPs in the fund include Danish pension fund Velliv, and Pension & Life Insurance, as well as US institutional investors, which make up the majority of its LP base. These investors include TIAA. Also backing the fund are high-net-worth individuals from the US, Unnithan said.

For its next fund, Nuveen expects to build on the relationships formed during the fundraise for its current vehicle, Unnithan said.

Investments
The fund will invest in growth-stage companies on a global basis, splitting its investments between developed and developing countries with a expected 60:40 split in either direction, depending on the composition of the fund's next deals. The vehicle will make 8-10 deals, deploying equity tickets of USD 20m-50m with a USD 30m sweet spot. However, the fund can invest less if needed, depending on the needs of the company, Unnithan said.

The vehicle will target businesses focused on waste reduction, circular resource usage, energy efficiency and emissions reduction, in line with its climate change theme. When it comes to income inequality, the fund will back businesses aiming to expand access to, and reduce the cost of, basic products and services for underserved consumers. The fund's investments to date include India-based microfinance provider Annapurna.

The fund has made two deals to date and expects to bring this to six in 2022. Nuveen takes significant minority stakes and board seats when it invests, Unnithan said, adding that the companies backed by the fund will either be profitable or have a one to two year path to profitability.

The GP has exits on the horizon, but not from its current vehicle. "We are in deployment mode with this fund and are around three to five years from any exits, although we will see further capital raises for our companies that will validate our investment thesis," Unnithan said. "But we have 12 companies from our parent company's balance sheet and have made two exits from that portfolio already, and there are six exits from that pool to come this year."

People
Nuveen – Rekha Unnithan (co-head of private markets impact investing at Nuveen).

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