Roundtable PE and VC Impact Investing: Impact investing is about actions, not definitions

September 22, 2025

^{This roundtable report was originally written in Dutch. This is an English translation.}

Private markets offer fertile ground for impact investors who want to drive change, whether it concerns access to healthcare or stimulating the energy transition. However, transparency in private equity and venture capital is often more limited than on the stock market, which opens the door to impact washing. The challenges are considerable, but so are the impacts and return opportunities.

By Manno van den Berg

Impact investing has experienced significant growth in private markets. Institutional investors are increasingly looking for ways to create tangible social or environmental value while achieving good financial returns. But what makes an investment truly impactful? Which private segments should you invest in and which should you avoid? How do you apply impact in private equity (PE) and venture capital (VC)? How do you prevent it from remaining merely a good intention? And does regulation help, or does it actually work counterproductively?

These questions were discussed during a roundtable discussion on impact in private markets, organised by Financial Investigator. Six experts from institutional investors and asset managers discussed definitions, implementation, measurability, impact ambitions and challenges. Karin Bouwmeester, ESG Lead Private Equity at PGGM, acted as questioner and discussion leader.

One conclusion can already be drawn: the participants were fairly unanimous about the pillars of impact investing. They described impact as a combination of intention, measurable social or environmental change, credible implementation and financial return. However, they also warned against placing too much emphasis on definitions and urged participants to focus on achieving real impact.

Investors use terms such as ESG integration, sustainable investing and impact investing interchangeably, with SFDR Article 9 often being used as a synonym for impact. How do you view this?

Jennifer Signori: 'We make a clear distinction. For us, ESG integration is the basis: financial and material ESG factors are a standard part of the analysis. Sustainable investing is more thematic, such as a focus on healthcare or sustainable forestry. Impact investing clearly has a dual purpose: impact and financial return. There is also an obligation to measure the impact.'

Emanuel Eftimiu: 'I completely agree. We see ESG primarily as a tool for limiting downside risk. Sustainable investing is increasingly taking shape through the SFDR, particularly Articles 8 and 9. This means that it is mainly viewed from a regulatory perspective. Impact investing, however, goes further and revolves around intentionality and measurable results, but must also go hand in hand with financial returns. Otherwise, you are heading towards philanthropy.'

Ralph Engelchor: 'I think we need to be careful with labels. For example, we have noticed that Article 8 strategies can be more impactful in practice than some Article 9 funds. So the classification does not tell the whole story. As an investor, you have to make your own analysis and decide for yourself what is truly impactful.'

Alex Neve: 'The SFDR was written primarily with liquid, public markets in mind. Article 9 is quite difficult to apply in private markets. You don't always get the data you need. I don't think there is a private market fund that can truly comply with Article 9.'

Erik Jan van Bergen: 'If you want to be a frontrunner, you have to accept that you can't always measure or capture all the impact in definitions or frameworks. Tangible results for our members are more important in those situations. If it looks like impact, works like impact, and feels like impact, then it probably is.'

Andrew Carnwath: 'Impact investing goes beyond Article 9. Impact is about purposefulness, additionality and, above all, measurability. As far as ESG is concerned, I think we have reached the point where every private equity manager must include this in their investment policy. It is part of their fiduciary duty; it is the absolute minimum.'

How important do you consider additionality to be in impact investing?

Neve: 'Not very relevant. However, many clients, especially in the Netherlands, see additionality as an essential test. They want to know: would this impact have been achieved without our investment? But in public markets, you are one of many investors and have little influence. In private markets, you have more influence and your chances of additionality are greater, but it remains difficult to prove.'

Carnwath: 'We certainly think it's important: additionality should be part of the overall impact assessment. You can break it down into two levels: additionality at the company level and additionality at the investor level. At company level: is this company doing something unique? Does it provide products or services that bring about real change? At investor level: what do we add, for example with engagement and impact measurements, that others do not? In a strict interpretation, additionality at investor level is difficult to substantiate, especially if you also strive for a market-based return. After all, if you don't invest, someone else will. If you are willing to settle for a lower return, you are more likely to be additional. You can then invest where others fail to do so.'

In private markets, you have more influence and your chances of additionality are greater, but it remains difficult to prove.

Van Bergen: 'We are primarily concerned with having a real impact on the lives of our four million members. We are agnostic about the source of additionality – company or investor – as long as the result benefits our members. Impact investing must be in line with the values and needs of your supporters, not just with regulations or theoretical frameworks.'

Engelchor: 'We approach additionality from the perspective of investor contribution: if you do the right things as an investor, for example by helping a company prepare for follow-up investments and scale up, this can have a very positive effect on future impact and financial returns. Strong additionality goes hand in hand with market-based returns.'

Eftimiu: 'In our role as multi-manager, we select fund managers. So what is our additionality? For me, it lies primarily in strengthening the impact approach of our GPs. We compare their impact strategies and processes and can therefore provide constructive feedback, indicating where there is room for improvement.'

Signori: 'We focus primarily on additionality at the company level. We look for market leaders, companies with a competitive advantage, that are truly distinctive. This often goes hand in hand with their potential for a positive financial return. As far as additionality as an investor is concerned, as an LP in hundreds of funds, we consistently indicate what we consider important in terms of impact.'

In the Netherlands, more and more institutional investors, such as pension funds, are starting to engage in impact investing. What should they pay attention to?

Van Bergen: 'For us, it started with the question: what do our members want? We chose three impact themes that fit our DNA: healthcare, biodiversity and energy transition. It is important to dare to choose. You cannot focus on all themes or SDGs. Also, keep an eye on your entire portfolio. We ultimately allocated 10% of our assets to what we call “high impact”, but the other 90% also counts, of course. You can take steps there too, for example through positive inclusion, engagement or exclusions.'

If you are prepared to settle for a slightly lower return, you can take additional action more quickly. You can then invest where others fail to do so.

Carnwath: 'A good impact strategy is built on three foundations: what return do you want? Which theme do you want to have an impact on? And how are you going to measure the results? These three factors together determine the effectiveness of your approach.'

Engelchor: 'It starts with setting goals. It is also crucial to take a good look at the market: can you achieve your goals with the existing investment opportunities? Finally, there is implementation. How do you want to apply impact in your portfolio? Some funds try to integrate impact within existing asset allocations, but that approach may lack the flexibility needed to achieve their own impact objectives. A category such as agricultural land does not always play a role in asset allocation, but can be very effective in achieving impact objectives for biodiversity. An alternative is to create a separate allocation based on impact objectives.'

Neve: 'Many Dutch pension funds want to do more with impact, but have no allocation to private equity. And that is precisely where most impact opportunities lie, especially in VC and infrastructure. How should they deal with this? Where does it fit into the allocation? Is there an approved investment case for it? That is also a requirement of the regulator.'

Pension funds have a fiduciary duty. How does that relate to the ambition to achieve social and environmental impact?

Eftimiu: 'Our impact investments must always be in line with delivering risk-adjusted returns. More and more studies show that impact investing can generate market-consistent or even above-average returns, especially in certain growth sectors within thematic impact investing, such as renewable energy, sustainable agriculture, health technology and fintech. Impact investing is therefore fully compatible with the fiduciary duty.'

Engelchor: 'Fiduciary responsibility goes beyond just risk and return. It also includes non-financial outcomes. If you can find out what your participants consider important, in addition to financial returns, and you can link those values to their investment portfolio, then that is a perfect example of how fiduciary duty and impact investing fit together very nicely.'

Can lower returns or higher risks be acceptable in exchange for high impact?

Signori: 'That's a difficult question for our clients. Some are sometimes willing to accept more assumed risk, but only with the prospect of a higher return. For example, with new strategies from experienced teams, or in emerging markets. But accepting lower returns in exchange for impact? No, we rarely see that.'

Eftimiu: 'We build portfolios tailored to the client's goals, including how much environmental or social impact they want to achieve. Within that framework, we maintain a good risk-return ratio. We do not accept lower returns in exchange for impact. Our impact strategy focuses on technological solutions in Western Europe and North America that address climate change and social issues. Venture capital plays an important role in this. Incidentally, we do not avoid emerging markets because of their lower impact potential, but more because governance, local regulations and currency risks are generally less predictable there.'

Impact investing must be in line with the values and needs of your supporters, not just with regulations or theoretical frameworks.

Neve: 'I see that lower returns are inevitable for Dutch funds that invest in affordable housing, for example. Even if you want to invest in biodiversity through sustainable agriculture or forestry, you have to be prepared to sacrifice returns. Land prices here in the Netherlands are much higher than in the US or Australia, for example. The solution lies in diversification. Include such an investment in a broader allocation with exposure to higher returns in, for example, the US or Asia. But impact sometimes comes at the expense of returns.'

Carnwath: 'And that's fine, as long as it's a conscious choice.'

What challenges do institutional investors face when implementing PE or VC impact strategies?

Engelchor: 'Our clients, especially pension funds, work with tightly defined portfolios: limited in terms of costs, region and risk. That doesn't always match where the impact opportunities lie. You need flexibility and consultation to bridge that gap. For example, most pension funds that invest in private equity focus on buyouts. There are impact opportunities there, but there are many more in growth and venture segments. Making these categories accessible requires clear frameworks, coordination and time. The same applies geographically: emerging markets offer great impact potential, but pension funds are cautious about them, mainly because of risk and return, and less because of impact.'

Carnwath: 'One point that is often overlooked is competition from non-impact players. Companies that serve social needs and have strong growth opportunities are attractive to everyone. In the mid-market segment, however, companies rarely see themselves as impact companies. They therefore often seek capital from sector specialists, not impact funds. This makes it difficult for impact investors to access such deals. That is why we work and invest together with sector and regional partners. They bring knowledge of the sector to the table, we bring the impact skills: measurement, evaluation and guidance.'

Van Bergen: 'There were two major challenges for us. First: do you put impact investing in a separate ‘bucket’, or do you integrate it into every mandate? Second: the knowledge needs to be more widely shared. Not only among the initiators, but throughout all levels of the organisation, including risk management and compliance. That takes time and good planning.'

Venture capital, like emerging markets, is a segment where pension funds are cautious. Why should they consider VC anyway?

Van Bergen: 'I'm not saying that every institutional party should include VC in its portfolio, but for us it made sense. VGZ has a great deal of knowledge of the healthcare sector: 1,700 colleagues, four million members. We can help young healthcare companies with their innovations. Not only financially, but also with substantive support. In this way, we create value for our members in the longer term, both financially and socially. In other sectors, such as energy or biodiversity, we don't have that operational expertise, so we don't get involved in VC. But if you use VC wisely, you can combine impact and return.'

Neve: 'Exactly. It has to be in line with what your participants consider important. That alignment with your supporters is crucial.'

Engelchor: 'Pension funds often want to do more in private equity buyouts, but that market is still relatively small and developing. You have to help build that ecosystem. VC is essential in this regard. It offers promising opportunities and helps to create a market in which you can later make scaled-up, less risky PE investments.'

There is a lot of potential in small and mid-cap companies. Through co-investments, investors can assess companies individually.

Carnwath: 'That's right. If we want a sustainable impact ecosystem, we need to finance the entire chain. Currently, most of the money goes to large buyouts, while only about 300 such deals take place each year in Europe and North America, and only a small proportion of them have a meaningful impact. In the mid-market segment, however, there are 8,500 deals annually, most of which are impactful. However, only a fraction of the capital flows to smaller funds. That has to change. These funds invest in the champions of tomorrow and ultimately feed the large funds. If that doesn't happen, the entire impact investment universe will become unbalanced.'

Signori: 'There is indeed a lot of potential in small and mid-cap companies. Through co-investments, investors can assess companies individually, without running the ‘blind pool’ risk of a fund. We also appreciate that smaller companies often have multiple exit options, such as other financial buyers, strategic acquisitions, buy-and-build, and so on. In this market, with pressure on exits and liquidity, that is a real advantage.'

Carnwath: 'We do not invest in VC, partly because the impact risks are higher there. For example, a start-up may start out with a healthcare solution, but completely change its revenue model along the way. As a minority investor, you can hardly influence that. The impact can be enormous, but the outcome is less predictable than with a mature company with a proven revenue model. The same applies to companies that are in transition, for example from oil and gas to renewable energy. A major impact is possible, but if circumstances change along the way, this can lead to a mismatch between return and intended impact. The results may then deviate from expectations. This calls for a different approach. We do not take on those risks, but it is certainly a legitimate strategy.'

We have discussed implementation, now let's talk about measuring impact. How do you approach that?

Signori: 'We build on existing market standards such as the SDGs and the Impact Management Project frameworks. We use these during due diligence, monitoring and reporting. We focus on a few key KPIs that are relevant to the specific company. This varies per sector: impact in education or healthcare requires different measurement models than climate or nature conservation. We link KPIs to measurable outcomes, using a ‘theory of change’ and, where possible, supported by academic research. We combine quantitative and qualitative information into a whole that is understandable to investors.'

Eftimiu: 'We have developed an internal software system that is aligned with internationally recognised standards such as the SDGs and IRIS+, in order to systematically collect KPIs from underlying funds and co-investments, usually on a quarterly or annual basis. As a multi-manager, we do not have direct access to the companies themselves and each fund manager reports data in a different way. Our biggest challenge was therefore to set up a standardised collection and measurement system that not only enables us to accurately track the impact in our portfolio, but also ensures consistent and transparent reporting to our investors.'

Because each sector and investment has its own context, it is difficult to benchmark impact universally.

Carnwath: 'Our approach is different. We help company management to develop the KPIs themselves. This gives us real involvement at board level. These KPIs are then applied in day-to-day operations to achieve returns and tangible impact. Because we invest in a limited number of companies, we can provide intensive guidance throughout this process. This ensures that impact thinking becomes part of the company's DNA, even after we leave.'

Van Bergen: 'That's exactly the point: you have to make companies realise that it's not an expense, but an investment in business operations. And if a company can demonstrate that it reports well on impact during a capital round or exit, that makes it more attractive.'

Carnwath: 'Many of these companies were founded with a social purpose, but have not yet thought about how to measure it. If you help them with that, it accelerates their growth and indeed increases their exit value.'

Van Bergen: 'You shouldn't overload companies with this. Many young companies have small teams and don't have time for seven different reports for seven investors. That's why we are working with a number of institutional parties in the Netherlands to develop a standard for the healthcare sector, so that companies can report uniformly and don't experience unnecessary bureaucracy.'

You emphasise the importance of customisation and a sector-specific approach, but at the same time, many investors also want to benchmark impact. Is that possible?

Eftimiu: 'Yes, but to a limited extent. We distinguish between primary and secondary KPIs, with the primary ones usually being quite concrete and closely related to the SDGs, such as reducing CO₂ emissions. This makes it easier to compare them across multiple funds. However, because each sector and each investment has its own context, it is difficult to benchmark impact universally. We mainly use benchmarking internally to assess how our managers are performing on specific KPIs and impact targets. This allows us to identify best practices and areas for improvement.'

Neve: 'Why would you want to benchmark? The only benchmark that matters is a performance benchmark for returns. If a company does what it has agreed to do: deliver demonstrable impact, cause no significant harm (the ‘do no significant harm’ test of SFDR 9) and fall within the policy frameworks, what is the added value of an impact benchmark?'

How do you measure that return?

Neve: 'With a regular market benchmark. Pension funds can invest globally, so you compare with the broader market. Private market benchmarks do exist, but they are often limited. Ultimately, what matters to me is this: does a fund deliver what it promises?'

Van Bergen: 'Benchmarks are rarely available in new markets. You start by comparing funds within the same sector or strategy. Gradually, more data and references become available. We therefore mainly measure against our own expectations and copy best practices where possible. Benchmarking for the sake of benchmarking is pointless; it must serve to learn and improve.'

Neve: 'Exactly. Sharing best practices is useful, but that's different from benchmarking. Impact is often context-dependent. What works for one company is irrelevant for another.'

Engelchor: 'Peer review can be valuable, for example in renewable energy. Then you want to know: how much impact do I get per euro invested? We try to find that out at GP level by comparing portfolios.'

Van Bergen: 'CO₂ is a good example of something we can now compare effectively. It’s a good basis for benchmarking. To that end, ten years ago we set up the Partnership for Carbon Accounting Financials (PCAF) with other Dutch institutions. But what about social issues? We’re still a long way off.'

We look at the effectiveness of a fund manager within its market. The aim is to make better-informed choices for future allocations.

Neve: 'And then the question is: what do you do with the outcome? Are you going to stop investing in a company that, according to your benchmark, has a ‘lesser’ impact? Impact is rarely black and white.'

Engelchor: 'We compare at GP level, not per project or company. We look at the effectiveness of a fund manager within its market. The aim is to make better-informed choices for future allocations.'

Carnwath: 'I completely agree. However, it is more art than science. You can only make meaningful comparisons between managers with the same strategy, vintage and region. Impact is also personal; everyone has their own impact preferences. Therefore, ultimately assess managers on what they promised to do versus what they actually did.'

Signori: 'True benchmarking within this segment is still a long way off. What is important now is greater transparency about assumptions and calculations. As far as I am concerned, that is the next step that LPs and GPs are working on. There are so many different types of companies, models and growth stages that a single uniform approach can be quite challenging. However, within private equity, you can work towards practical guidelines in complete transparency: what is “best practice” in practice, what would be the “gold standard” from an academic point of view.'