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June 17, 2020

What is Social Impact Investment Banking?

MHT Partners

To some, the terms “Social Impact” and “Investment Banking” may appear to conflict with one another. After all, aren’t investment bankers supposed to be “win-at-all-costs” dealmakers?

Well, like most things in life, it isn’t quite so black and white. The job of an investment banker is to facilitate transactions that achieve clients’ goals. In the past, that often meant focusing largely on one thing: maximizing value. Today, however, financial results are not the only measure of a successful business. To a growing cohort of entrepreneurs, business owners, and investors, companies that value the social impact of their operations are growing in influence and importance. As a result, partnering with an investment banker that can elevate the social or environmental impact of clients, while at the same time optimizing financial outcomes, is critical for a company vested in the impact of its business.

Given our expertise and deep experience with socially invested companies and “ESG” (environmental, social, and governance) investing, MHT Partners has launched a focused initiative to advise social impact and double bottom-line companies and investors as part of a Social Impact M&A Advisory program.

In recent years, impact and ESG investing has grown significantly, driving demand as investors look to partner with high-performing, impact-driven companies. The Global Impact Investing Network estimates that impact-specific assets under management (“AUM”) grew at an annual rate of 17% between 2014 and 2018. In the U.S., MHT Partners estimates that private equity impact investment AUM exceeds $30 billion[1]. Many of the largest and longest-standing financial sponsors are deploying impact funds, including KKR, which in February closed its $1.3 billion Global Impact Fund, and Bain Capital, which is currently raising its second fund under Bain Capital Double Impact. The growing community of impact investors and companies is creating a dynamic new market.

The growth in impact investing is not surprising, as there is ample evidence to suggest that companies that value social impact experience outsized returns and rates of growth. For years many marquee investors, often spurred on by powerful limited partners, have divested of interests in the munitions and fossil fuel industries. Now, real-world evidence from the Carlyle Group supports the case that socially conscious practices, such as increased board diversity and the incorporation of renewables into energy portfolios, yield more favorable economic outcomes for companies. Through the first four months of 2020 and the COVID-19 crisis, ESG funds have drawn more than $12.2 billion of capital and outperformed the market according to the Wall Street Journal. Impact investing is here to stay.

As investment bankers in the middle market, we seek to align ourselves with clients who share our values. The history of our firm reveals a long track record of advising high-performing companies in the consumer, healthcare, technology, and education segments that value social or ESG, as well as financial, outcomes. Our frequent dialogue with the most active and experienced funds that have an expressed mandate to invest in companies with a positive social impact gives us unique insight into the differentiating factors that are coveted by impact investors. We believe that companies that value social impact are poised to experience outsized growth in today’s economy, and we are excited to formalize our deep experience by moving forward as a leader for providing Social Impact M&A Advisory services.

If you would like to learn more about MHT’s Social Impact M&A Advisory practice, please e-mail Alex Sauter (asauter@mhtpartners.com).

[1] Excludes real asset strategies

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