ImpactAlpha LP / GP

How Capricorn is staking the ‘missing middle’ of impact funds

ImpactAlpha · March 4, 2025

Greetings, Agents of Impact!

Welcome to this week’s ImpactAlpha LP/GP, where we take you inside the real business of impact investing.

This week:

Scaling impact fund managers
Blackstone’s $5.6 billion transition fund
How LPs differentiate on impact management
Clarion call for impact in municipal infrastructure

Featured: LP / GP

Capricorn stakes out the next wave of large-scale impact fund managers (Q&A). Capricorn Investment Group is paying it forward – and taking a stake. The $12 billion asset management firm founded by former eBay president Jeff Skoll has taken minority stakes in about a dozen impact fund managers it thinks can help drive the transition to a sustainable economy and build profitable businesses. Capricorn last month took a stake in Closed Loop Partners, which launched in 2014 with capital from strategic investors like Pepsi and Walmart to invest in circular economy companies and recycling infrastructure. Closed Loop has invested more than $500 million in 80 companies. That puts Closed Loop in the sweet spot of Capricorn’s own $365 million Sustainable Investor Fund, a player in the booming “GP stakes” business, in which investors or asset managers take minority stakes in the general partnerships of smaller fund managers (see, “Asset managers are scooping up ‘GP stakes’ in impact funds”).

“The transition toward a more sustainable economy and toward finding more solutions in areas such as climate change, financial inclusion, and health access and equity is a capital intensive one,” Capricorn’s William Orum tells ImpactAlpha. “We want to help capitalize and grow the asset management industry that is purpose-built to deploy this capital.” ImpactAlpha spoke with Orum, a partner and member of Capricorn’s investment team, and Marie-Céline Damnon, a director on the investment team, about the firm’s GP stakes strategy, the need for fund managers to specialize, and what’s next in impact.

Growing assets. The Sustainable Investor Fund, launched in 2019, has taken stakes in Lafayette Square, which invests in middle market companies in overlooked communities; MSquared, a women-owned real estate impact firm; and Community Investment Management, which lends to tech-enabled small business lenders. Last year, it bought into SER Capital Partners, which backs mid-sized renewable energy and decarbonization companies. Capricorn has helped those managers grow their total assets under management over the past five years, by more than six-fold, to $20.8 billion, according to the firm. Like other GP stakes funds, Capricorn gets a cut of the fees its set of fund managers collect and a cut of their “carry,” or share of the profits from their portfolio companies, as well as long term appreciation in the value of the general partnerships. Other impact areas on Capricorn’s radar: nature-based solutions, food and agriculture, and sustainable infrastructure.
Missing middle. Capricorn sees an opportunity for fund managers with $100 million to $1 billion in assets that have carved out a specialized impact niche and, with capital and resources, can become the next impact fund management powerhouses. “People talk about the missing middle in climate; to us, there’s a missing middle in asset management,” says Orum. He notes the concentration of large, established multi-billion dollar climate and sustainable infrastructure funds on one end, and a preponderance of sub-$100 million funds on the other. “This is ultimately a scale business,” he says. “You have to be over $100 million to start to really have discussions. Most asset owners view emerging managers as anything below $2 billion. So we have to be a bit bold in terms of putting – prudently – capital into these businesses that gives them a shot at success.”
Impact ecosystem. The GP stakes business is just one arm of Capricorn, which manages the assets of Skoll as well as of other families, foundations and institutional investors. The firm knows something about fund management from building its own successful Technology Impact Fund and Technology Impact Growth Fund, venture capital and growth funds that invest in “deep tech” climate solutions. The firm also operates an advisory and outsourced chief investment officer, or OCIO, business for foundations and wealthy families. This week Capricorn hired Mark Berryman and Nick Flores, formerly of Caprock, as partners on the advisory side. “We want to position Capricorn as a solution provider that helps to scale the entire ecosystem,” says Orum.
Keep reading, “Capricorn stakes out the next wave of large-scale impact fund managers (Q&A),” by Amy Cortese on ImpactAlpha.

Dealflow: Energy Transition

Blackstone raises $5.6 billion for latest energy transition fund amid fundraising slump. Stubborn inflation and high interest rates, policy uncertainty and a lack of exits are conspiring to slow capital raising for funds investing in the energy transition. Such funds raised $18.8 billion last year, down from a record high of $51.3 billion in 2023, according to PitchBook. Blackstone, the $352 billion private equity firm, is bucking the downturn. “We believe there is immense opportunity to deliver attractive returns to our limited partners through investments that benefit from the growing demand for electricity, grid reliability and energy efficiency,” said Blackstone’s David Foley. The fourth Blackstone Energy Transition Partners fund closed at $5.6 billion, with commitments from state and city pension funds in Texas, Arizona, Michigan, Hawaii, Minnesota and San Francisco. The Teacher Retirement System of Texas, the state’s largest public pension manager, committed $200 million to the fund in 2023. Blackstone’s fourth energy transition fund raised 30% more capital than its predecessor.

Renewables portfolio. Companies in the energy transition fund’s portfolio includes Westwood Professional Services, a Texas and New York-based firm that provides engineering design for the development of wind, solar and energy storage projects. Australia’s Energy Exemplar builds stimulation software for utilities and energy regulators to manage complex energy projects. Houston-based Lancium is developing five gigawatts of data centers in western Texas that will supply clean energy to power AI applications. Blackstone has said it sees an opportunity to invest $100 billion over a decade in the energy transition and climate change. The private equity investor raised $7.1 billion in 2023 for its third green private credit fund, the largest transition-focused private credit fund, which finances large-scale energy projects globally.
Green infrastructure. Toronto-based Brookfield Asset Management is looking to raise at least $7 billion for its fourth infrastructure debt fund, focused on renewable energy, Bloomberg reported. The fund would be the largest in Brookfield’s series of infrastructure debt funds; its third fund raised $6 billion in November 2023. Brookfield last week signed an agreement to acquire the US onshore renewable business of UK-based National Grid for $1.7 billion. Brookfield will take over the utility’s portfolio of utility-scale solar, onshore wind and battery storage facilities, some of which are still under construction. Last month, Brookfield said it would invest €20 billion ($21 billion) in data centers and AI infrastructure development in France over the next five years.
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FairPlay secures $10 million to help AI-using financial institutions reduce bias. More businesses are using AI algorithms to streamline high-stakes decision-making, from approving loans, to pre-screening job candidates, to managing medical care. FairPlay launched in 2020 to help fintech companies, banks, insurance companies and other financial services companies identify blind spots and mitigate bias in their decision-making systems. FairPlay’s customers have reported increased revenue and improved financial health for consumers, as well as better compliance management, from the use of its software tools. “FairPlay has built an impressive set of products to help its customers evaluate their models, broaden credit access, and strengthen the financial services ecosystem so that institutions of all sizes can adopt responsible AI practices,” said Schuman Chakrabarty of JPMorganChase, which backed FairPlay’s round via through its impact finance and advisory division.

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Dealflow overflow. Investment news crossing our desks:

KKR acquired a $400 million majority stake in Bangalore-based hospital chain HealthCare Global Enterprises. (KKR)
Portuguese aquaculture startup SEAentia scored €16 million ($17 million) from investors including Indico Capital Partners’ Blue Fund to produce high quality corvina, a type of white fish. (EU-Startups)

Virginia-based Claros raised $9.7 million from Red Cell Partners, General Catalyst and other investors to accelerate energy efficiency in data centers and their AI applications. (Red Cell)

Short Signals: Impact Management

LPs are differentiating themselves on how they manage and improve GP impact. Owners and managers of impact capital flipped the pitch at last week’s Latin American Impact Investing Forum. In a role reversal, LPs defended their strategies and priorities to an audience of GPs seeking capital to scale their impact investment strategies. Investors in private impact funds are increasingly differentiating themselves on what they bring to the table. More specifically, LPs are letting it be known how they can help improve the impact outcomes and the financial returns of GPs. “We are aware that the questions we ask have an effect on the fund managers we invest in,” Jessica Droste Yagan and Priya Parrish of Chicago-based Impact Engine, write in “What is an impact LP.” Impact LPs, write Yagan and Parrish, “engage in deeper questions about the implications of our choices on our sourcing strategy, investment universe, portfolio construction, portfolio management approach, time horizon, etc.” That LPs are seeking an impact edge is just one of the LP/GP-focused “short signals” we’re following this week:

Private equity outlook. Private equity dealmaking and exits are up. Fundraising is down. And uncertainty reigns amid back-and-forth policies regarding tariffs and other macro issues. The mandate for GPs: “If you can’t offer investors a differentiated value proposition, raising your next fund is going to be a serious challenge,” write the authors of Bain’s Global Private Equity Report. (Bain & Company)
University endowment bump. A growing number of endowments at US colleges and universities are adopting impact investment strategies. Roughly 10% of the endowments at more than 650 higher education institutions in the US report implementing impact investing strategies – up 21% over last year, according to the latest study from the National Association of College and University Business Officers. (NACUBO)

Endowment impact benchmark. Fifteen academic institutions and foundations with assets under management ranging from $50 million to over $20 billion have completed a pilot assessment of their impact management practices from Intentional Endowments Network and Bluemark. Participants performed strongly in transparency (83%) and collective action (93%). Room for improvement: shareholder engagement (61%). (Intentional Endowments Network)
Meeting LP demand for infrastructure impact. Energy transition. Responsible consumption. Clean water. More than 190 investment managers manage 401 infrastructure impact funds in the Phenix Impact Database. Currently 168 are open for investment. Driven by demand for stable, long-term cash flows, pension funds made up more than a quarter of all allocators to infrastructure funds, followed by foundations (12%) and funds of funds (12%). (Phenix Capital)

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Agents of Impact: Follow the Talent

Mark Berryman and Nick Flores, formerly of Caprock, join Capricorn Investment Group as partners. Berryman will join Capricorn’s Investment Committee (see, “The ranks of ‘impact alpha’ fund managers expand, along with client demand and the talent pipeline”)… Eric Glass, previously with AllianceBernstein, stands up Clarion Call Capital to “direct fixed income investments toward what has been neglected for too long – municipal infrastructure that delivers real value, without extraction or exploitation.” For background, see “‘You can’t do impact on a passive basis’: Q&A with activist muni-investor Eric Glass.”

Alex Struc, previously with Goalsfirst and PIMCO, joins Standard Chartered as managing director… Robin Peterson Gibbs, previously with Brown University, joins Social Finance as its first chief philanthropy officer. Alexis Stoller also joins the team as vice president and head of communications… UBS Optimus Foundation promotes Gayatri Suri to director of social finance… Browning the Green Space adds Tatiana Soto, previously with Teach For America, as program manager.

LeapFrog Investments is searching for a strategy manager in Sydney… The San Francisco Foundation is looking for an associate director for program related investments… Planeteer is on the hunt for an operating lead in New York… Unilever is hiring a social mission director for Ben & Jerry’s in Burlington, Vt… Nuveen seeks a quantitative ESG research vice president… Bridges Impact Foundation has an opening for a senior associate… ICA Fund is recruiting a chief investment officer.