Apollo joins other private equity players in impact investing arena

Apollo Global Management Inc. is venturing into the world of impact investing, a corner of finance where most of its private equity peers already have substantial operations.

Marc Becker, a senior partner at Apollo, and Joanna Reiss, who joined this month from Cornell Capital, will co-lead the new platform known as Apollo Impact, the company said in a statement. Lisa Hall, who was previously a fellow at Georgetown University’s Beeck Center for Social Impact and Innovation, will chair the initiative.

Impact investing, where fund managers seek to both make money and leave a measurable positive impact on society or the environment, has gone from a niche discipline just a few years ago to a $715 billion market. The funds have been attracting investors at a time when the deadly coronavirus pandemic and racial unrest in the U.S. have highlighted societal inequalities.

Apollo is following private-equity rivals, including Bain Capital LP, KKR & Co. and TPG, in staring an impact business. Becker, who has been at Apollo for 24 years, said the firm prefers to take its time before entering new markets and to be decisive when it does so.

“We tend to observe the opportunity set and then overlay the Apollo angle, the Apollo secret sauce, onto it, and that’s exactly what we’re doing here,” Becker said. “The time has come for Apollo to take a leadership role in the space.”

Instead of focusing on early-stage or venture capital impact investments like many of its peers do, Apollo, which has about $415 billion of assets under management, will target later stage companies. It will focus on the mid-market, where companies typically have a total enterprise value of $150 million to $500 million.

That’s a corner of the market that has plenty of “white space” for Apollo to grow a sizable business and have a bigger influence, Becker said.

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For Reiss, who has spent most of her career in mid-market private equity, including the past seven years at Cornell Capital where she was a founding partner and also led the firm’s ESG program, the later-stage mid-market represents “a very deep and liquid set of opportunities.” Reiss said that business segment will allow Apollo to do “impact at scale.”

Apollo Impact will invest in education, health care, safety and wellness, resource sustainability, and so-called industry 4.0, which refers to the digitalization of manufacturing and the combination of technologies such as machine learning and cloud computing to enable more efficient production. The New York-based firm will focus on private markets and will take controlling stakes in companies.

“You have tremendous ability to effectuate change as a consequence of being a control investor, and I personally believe very deeply in the power of private enterprise to, under thoughtful ownership, drive real societal and environmental change,” Reiss said. “We in private equity have the unique ability to control those entities and own them with great intentionality.”

The impact business is the next step for Apollo after 10 years of implementing environmental, social and governance factors into its investment strategy, Becker said. It’s also an appropriate time to be thinking about how investment firms can contribute to tackling some of the biggest challenges society faces, he said, referring to the pandemic and racial tensions.

The new initiative should not be confused with charity or philanthropy as Apollo plans to make positive returns from its impact investments, Hall said.

“In the early days of impact investing, there was this constant debate: Is there a trade off, is impact investing by definition concessionary?” Hall said. “I don’t think anybody’s ever going to question that Apollo wants to achieve strong financial returns for its investors.”