Nuveen’s private markets group has been at the forefront of impact investing for more than a decade with a strategy focused on finding companies with market-based solutions aimed at creating a “more inclusive world” and a “just climate transition,” says
Rekha Unnithan,
the firm’s co-head of impact investing.
The New York-based firm began offering a global impact strategy in 2012 for the TIAA General Account that includes a growth equity portfolio focused on inclusive growth and resource efficiency, and a real estate portfolio centered on affordable housing. In 2014, TIAA bought Nuveen, which serves as TIAA’s global investment manager.
Last year, the firm launched the Nuveen Global Impact Fund to expand its private equity offering to third-party investors. It announced its first close on US$150 million in new commitments in July, including US$50 million from Velliv, a Danish pension fund. Nuveen plans to close the fund when it reaches US$300 million, Unnithan says.
Together, the two pools of capital managed by Nuveen’s private markets impact group exceeds US$1.2 billion.
Nuveen has been involved in impact almost since the sector’s beginning, serving among a primary group of investors that in 2009 formed the Global Impact Investing Network (GIIN), a group dedicated to research and strengthening the impact field through development of best practices.
“We were doing this well before it was cool,” she says. “We saw the need for private capital to play a role on these issues of people, planet, and solutions.”
While Nuveen can’t reveal results for its private market investments, Unnithan says they are “in line with the expectations of our clients,” and that the target net internal rate of return for the private equity portion of the fund is between 18% and 20%, while the target for the real-estate portion is between 9% and 11%.
Penta recently spoke with Unnithan about Nuveen’s impact strategy and how the firm assesses its impact.
Getting Started in Impact
When Nuveen first began exploring growth-equity impact investing, the firm came across entrepreneurs and companies that were just starting out with an aim of tackling big issues—everything from lack of financial access, to lack of proper nutrition, health care, and education.
“These basic services are built for middle- and high-income customers,” Unnithan says. “The low-income customer is drastically underserved.”
While there was a lot of innovation, it was difficult to take on the risk of investing initially. As growth-equity investors, Nuveen sought to avoid startups and instead invest with companies that had a track record, including a demonstrated history of revenue and profits. With few of those kinds of companies around, Nuveen’s initial approach was to back fund managers already in the sector, “to learn from…
Read More: Future Returns: Nuveen’s Private Market Strategy for Impact