ImpactAlpha LP/GP: Private-credit debt bubble makes even impact investors nervous

Greetings, Agents of Impact! 

Welcome to this week’s ImpactAlpha LP/GP, where we take you inside the real business of impact investing and the dynamic relationships between owners, managers and intermediaries of impact capital.

📞 Get PluggedIn: Blending and braiding capital to power the future of work. The climate crisis and the jobs crisis are inextricably linked. Join Taj Eldridge of Jobs for the Future and ImpactAlpha’s Sherrell Dorsey for a special edition of PluggedIn on how bridge funding, blended finance and braided capital can be used to create the good green jobs of the future. Eldridge and Dorsey will be joined by members of JFF’s Investor Network Capital Allocators Initiative, including Green Power Ventures’ Reginald Parker, Monte’s Fam’s Edward Jean-Louis, and IFM Investors’ Daniel Kriozere. Get PluggedIn, Monday, Nov. 10, at 10am PT /  1pm ET / 6pm London. RSVP today. 

In this week’s newsletter:

• Impact debt funds feel private-credit jitters
• Apollo throws a lifeline to offshore wind in Europe
• Entrepreneurship through acquisition in Quebec
• Mobilizing African pension funds for small-business financing

Featured: Debt Bubble? 

Private credit jitters even have impact investors on edge. Investment giants spent their quarterly earnings calls this fall defending their private credit investments amid concerns over the hidden risks of a ballooning asset class. Such concerns exploded when the bankruptcy of First Brands, an indebted auto parts supplier, led to steep losses for some lenders. “We do not view the events that have unfolded for those companies as canaries in the coal mine for the health of the private credit markets,” says Marc Lipschultz of Blue Owl Capital, which has nearly $150 billion in private credit assets under management. The asset class had surged to $3 trillion by the start of the year from $2 trillion in 2020. The worry is that fierce competition for deals and mountains of dry powder may tempt lenders to relax their standards. Impact investors have also piled into private credit, an important source of non-dilutive capital for company growth, new facilities and expansion into new markets. A general withdrawal by institutional investors could hurt impact lenders as well. “It’s already hard to sell an impact-focused thesis to typically skeptical institutional investors. It certainly won’t be easier if their reference point for the overall asset class is negative,” impact investment advisor Antony Bugg-Levine tells ImpactAlpha. 

• Know your borrowers. About half of impact investors responding to the GIIN’s 2024 survey were pursuing private debt strategies. Investment consultant Bfinance counted at least 100 impact private debt funds in a recent report. Overextended finances, sloppy oversight and outright fraud can also sink impact firms – see Bitwise, Aspiration and All Here. But some in the field say that impact-focused lenders are safer given their smaller loan sizes, lack of syndication and high-touch approach. “Impact credit providers take more time to get to know their borrowers and are more committed to their long-term success, not just their ability to service debt until the next private equity sale,” says Bugg-Levine.
  
• Risk signals. The bigger risks: Tariffs are driving up costs, electricity prices are surging, and unemployment is on the upswing. Cuts to Medicaid and food assistance are scrambling livelihoods and business models in lower-income communities. Community lenders at the Opportunity Finance Network conference last month were on high alert, scrutinizing loans and even laying off staff. “Our investors are nervous,” said Tim Martin of Enterprise Community Loan Fund, a housing and construction lender.
  
• Principals vs. agents. Ares Management, Apollo Global Management and Blackstone have raised multi-billion-dollar debt funds and taken business from less flexible banks. In the spirit of “If you can’t beat ‘em, join ‘em,” banks lent billions to fund their private lending rivals’ war chests. “There’s clearly a private debt bubble,” says Robert Brown of Impact Evaluation Lab. “There are risks that are not being priced in.” Impact private credit funds may be buffered from large syndicated loans that could come crashing down if the AI data center buildout falters. A broader crash could test de-risking tools and models honed over the decades. Perhaps the best defense for impact private credit funds came, albeit unwittingly, from Apollo’s Marc Rowan, who on an earnings call noted the difference between “agents” and “principals.” Principals underwrite risks they are prepared to hold; agents underwrite risks they think they can distribute, he said. “Sometimes it doesn’t matter, but when things are priced for perfection, we believe it matters more than ever.”
  
• Keep reading, “Debt bubble? Private credit jitters put even impact investors on edge,” by Amy Cortese.

Dealflow: Impact in Europe

Apollo buys $6.5 billion stake in Ørsted’s offshore wind project in the UK. Apollo Global Management will purchase a 50% stake in Hornsea 3, the largest offshore wind development in the world, located on the UK’s east coast. The private equity firm will also fund half of Hornsea 3’s remaining construction costs. When the wind farm is completed in 2027, it is expected to generate 2.9 gigawatts – enough power to provide low-cost, renewable electricity for more than three million UK households. The deal “represents an important milestone,” said Trond Westlie of Ørsted, the beleaguered Danish renewable energy developer behind the project. Ørsted is looking to sell a stake in its projects to investment partners to free up capital for future projects. As a partner in Hornsea 3, Apollo will “bring infrastructure expertise and scaled capital,” Westlie said. 

• US wind fallout. The transaction comes amid political headwinds and capital-raising challenges for Ørsted, especially in the US, where President Donald Trump has declared war on offshore wind. Ørsted plans to cut its global workforce by about 2,000 jobs, or 25%, by the end of 2027 as it focuses on Europe. Apollo will invest half of the $6.5 billion once the Hornsea 3 transaction closes later this year, and deploy the other half over the next two years as the project reaches certain milestones. “This is the latest large-scale transaction in Europe, where we are investing behind energy, critical infrastructure and transition assets in the region,” Apollo’s Marc Rowan said on yesterday’s Q3 earnings call. Apollo has invested a record $17 billion in energy infrastructure deals in Europe this year, the Financial Times reported.
  
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Rubio Impact Ventures secures €70 million for third Dutch impact fund. The Amsterdam-based impact fund manager has since 2015 invested in promising companies in the Netherlands’ growing social enterprise sector. Rubio is looking to make 30 investments with its third fund. It has expanded its thematic focus to include energy equity and green skills, in addition to circularity, education, economic inclusion and food systems. The fund brought in backing from ING bank’s impact investing group and NN Social Innovation Fund. They joined previous investors European Investment Fund, Invest-NL, Oost NL and fund-of-funds Brabantse Ontwikkelings Maatschappij. Several family offices and individual investors also backed the fund. The Netherlands Enterprise Agency participated with a loan from its seed capital program. Rubio’s Willemijn Verloop told ImpactAlpha the firm has been in “full fundraising mode” for around a year (see, Agent of Impact: Willemijn Verloop). With the new raise, female-founded Rubio now has about €220 million in assets under management.

• Keep reading.

Canada’s Thrive ETA Fund backs Magnum Capital to create female business owners in Quebec. Nearly 50,000 Quebec businesses are set to change hands in the next decade. “Entrepreneurship through acquisition,” or ETA, search funds finance aspiring entrepreneurs to search for, buy and grow existing companies. “Our goal is to demystify this path to entrepreneurship,” said Patricia Riopel, who launched Magnum Capital Partners with her husband, Enrico Magnani, to invest in search funds after successfully exiting a company she founded. With a $2 million commitment from the Business Development Bank of Canada’s Thrive ETA Fund, Magnum Capital will back women-led search funds in Quebec. “The search fund model provides a vital solution to the succession crisis facing many Quebec businesses,” said Riopel. Women lead less than one-quarter of the more than 700 search funds that have launched globally. 

• Gender-lens investing. The Business Development Bank of Canada launched the Thrive ETA Fund last month with $50 million to help 60 women purchase and operate existing businesses in Canada (see, “Expanding ‘entrepreneurship through acquisition’ for inclusive wealth creation in the US and Canada”). Magnum Capital is “a firm led by a trailblazing woman who knows firsthand the challenges and opportunities of being a search fund entrepreneur,” said BDC’s Sevrine Labelle, who leads Thrive ETA Fund. Magnum is looking to raise a $20 million to co-invest alongside up to 40 search fund entrepreneurs to acquire and operate lower middle-market businesses.
  
• Go deeper.

Dealflow overflow. Investment news crossing our desks:

• Japanese financial giant MUFG Bank, Canadian development finance institution FinDev Canada and the Green Climate Fund reached a $600 million fundraising milestone for their GAIA Climate Loan Fund. The blended-finance fund is aiming to raise $1.5 billion for climate adaptation projects in “markets most severely impacted by, and least equipped to respond to, climate change.” (Climate Fund Managers)
  
• Zurich-based Emerald Technology Ventures reached a €60 million ($69 million) first close for its second Global Water Fund, with backing from water companies Veralto Corporation and Ecolab. (Emerald Technology)
  
• Real estate investor CIM Group and Bryant Group Ventures raised $250 million for their impact investing joint venture, CIM-BGV Impact Ventures, which focuses on affordable housing in the US. (CIM Group)
  
• Theia Ventures, a family office-backed investment firm for India’s early-stage climate ventures, invested in Climitra Carbon, which makes biochar as a coal replacement in heavy industry. (Theia Ventures)

Signals: Pathways to Growth

Growth Firms Alliance is mobilizing local pension funds for local fund managers. So-called “growth firms” make up less than 20% of businesses in Africa, Asia and other emerging markets, but account for almost two-thirds of all new jobs. Yet even with solid revenues and strong prospects, such promising companies are often unable to access bank financing. The Growth Firms Alliance, a consortium of a half-dozen foundations, is supporting this week’s All-Africa Pension Summit in Kampala, Uganda. The summit, hosted by Uganda’s National Social Security Fund, will engage other pension funds on the continent, along with commercial banks and development financiers, to increase allocations to alternative assets. The specific focus is on small business finance and infrastructure projects (see, “Ugandan pension fund is creating new savers with investments in small business and agriculture”). “We think the impact is outsized relative to the support [growth firms] receive,” Matthew Guttentag, who last month took over as manager of the alliance, tells ImpactAlpha. “Members of GFA see this [pension capital] as a critical piece of the puzzle going forward, and we’re thinking about how philanthropy can be involved to mobilize this capital.”

• Capital wholesalers. Growth firms are generally defined as those able to double in size over five years. The alliance, including the Argidius, IKEA, Lemelson, Small and Visa foundations, are rallying resources, including funding, policy advocacy and technical support for such firms. For example, Ghana’s Ci-Gaba, a $75 million blended finance vehicle of Impact Investing Ghana, received funding from Argidius, aided by the GFA, to cover its operational expenses (for background see, “African investors warm to regional funds of funds to finance small business growth”). Structuring such vehicles will be key to taking “these large amounts of capital and deploying it in the ticket sizes growth firms need in Africa, where it’s always tricky to match up with investment models,” Guttentag says.
  
• The Call: Mobilizing growth funds for growth firms in Africa and Asia. Local providers of equity and debt represent an emerging asset class for local pension funds and high-net worth individuals, according to the most recent “State of play” report from the Collaborative for Frontier Finance (see, “Growth fund managers are tapping pensions to reshape development finance in Africa“). “The big challenge is how do you move big capital to little deals,” says CFF’s Drew von Glahn. Von Glahn will join Mirepa Investment Advisors’ Samuel Yeboah in Accra, Kenya Climate Ventures’ Victor Ndiege in Nairobi, and Adesuwa Okunbo Rhodes of Aruwa Capital Management in Lagos on a 90-minute Agents of Impact Call, Wednesday, Nov. 12, at 9am ET / 3pm Lagos / 5pm Nairobi. RSVP today.
  
• Keep reading, “With philanthropic capital, Growth Firms Alliance is mobilizing local pension funds around small-business financing,” by Lucy Ngige.

Agents of Impact: Follow the Talent

Ownership Works welcomes Sabrina Schick, previously with the US International Development Finance Corp., as a senior associate on its client advisory services team… Media Development Investment Fund adds Patricia Campos, editor of Brazil’s Folha de São Paulo newspaper, to its board of directors… ROC USA’s Thistle Community Housing has an opening for a program specialist.

CrossBoundary seeks a Latin America investment advisor… Chesapeake Conservancy is looking for a vice president of development and strategic partnerships… British International Investment is on the hunt for a data analytics associate for credit and impact risk… Project Drawdown seeks a program manager of global strategic partnerships, a research fellow, and a senior analyst for climate philanthropy and investing.

World Resources Institute is hiring a senior environmental economist… Marriott International is recruiting an ESG and culture director… Alongside the G20 Social Summit in Johannesburg, Resilience Capital Ventures will host a  discussion on unlocking capital for sustainable and inclusive development, Monday, Nov. 10.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Nov. 5, 2025