Our March 2025 newsletter
What exactly is an "Impact LP"?
Elevating Impact: What is an Impact LP and why do we need them?
By Jessica Droste Yagan and Priya Parrish
As the impact investing ecosystem has evolved and grown, we have seen more sophistication related to impact management and measurement. While neither completely adopted nor perfectly executed, definitions of and rubrics for what makes an impactful fund manager or company now exist as part of most impact diligence and reporting processes. As an investor in both funds and companies and an investee of many different types of investors -- from family offices, to foundations, to registered investment advisors -- over the years, we have been thinking about the other side of the impact market. We have been asking ourselves what investors in private funds, or Limited Partners (LPs), can bring to the table, and how they can affect impact outcomes. In other words, what makes an “Impact LP”, and why is it important that they (we) exist?
There are three things that stand out to us about Impact LPs versus “regular” LPs, or even “regular” LPs that are using impact definitions and rubrics in their processes: (1) critical thinking, (2) collaboration, and (3) ongoing engagement.
Critical Thinking
In the earliest days of Impact Engine and the impact investing industry, potential LPs considering investing in our funds wouldn’t ask us any questions about impact. In those days, due diligence was typically focused on financial returns, and a manager’s stated objective to be impactful was sufficient. Over the intervening years, it became more and more clear to the industry that statements about impact objectives did not always translate into a robust strategy for driving that impact throughout the fund’s activities, from sourcing to company selection and post-investment portfolio management. It thus became more common for LPs, including our own, to ask more questions about a manager’s criteria and approach to impact management. Today, most potential investors have a checklist they follow to conduct diligence on a manager’s impact approach.
Some investors, however, go beyond checking boxes about what we do or don’t do and engage in deeper questions about the implications of our choices on our sourcing strategy, investment universe, portfolio construction, portfolio management approach, time horizon, etc. They ask us deep, thoughtful questions about the implications of our choices, recognizing the intentionality behind our investment thesis and how it drives our investment strategy, process, and ultimately financial and impact outcomes. They make us think more deeply about how impact is reflected in our thinking and our decisions. We call these investors “Impact LPs” because their approach to due diligence has an impact on us.
As an Impact LP ourselves, we are aware that the questions we ask have an effect on the fund managers we invest in. If the only question a General Partner (GP), or fund manager, ever gets asked about impact is “how do you measure it”, then it’s unlikely they will be pushed to think critically about their impact thesis, criteria, and management approaches. If an LP never goes to the portfolio company level, zooming in to each company to understand how the fund’s thesis relates to the decision to invest in the company, GPs will think it’s acceptable to have investments in their fund that don’t match their impact objective. And if no one ever asks a GP about how their team’s identities and experiences give them perspective in their impact focus area, then they won’t necessarily prioritize hiring a team with relevant personal and professional experiences that can drive impact.
We have heard from many fund managers, both those we’ve invested in and those we passed on, that our very first introductory call led them to step back and think through their impact strategy with more nuance. For LPs wanting to create this impact, start by making sure that you don’t leave a call without understanding the following:
How do making money and creating impact go together and reinforce each other for this fund manager’s strategy? When might they be at odds?
Is the manager aware of this tension and how are they addressing it?
What are the implications on financial returns and impact?
We also know that in order to access the true breadth of the impact investing supply, we have to go outside the few tried and true firms to those who might be newer (emerging managers) or newer to impact (impact whisperers). Naturally, going into newer parts of the industry requires even more critical thinking. Emerging managers require willingness to take a bet on a new manager and think critically about their capabilities based on their experience and how it aligns with their strategy. Impact whisperers require thinking critically about whether impact is being adopted into decision making and strategy in a meaningful way.
Collaboration
Impact LPs have a different positioning in the conversation and process with us from the very beginning. Rather than asking questions solely to make their investment decision, Impact LPs engage in dialogue with us to give feedback and even brainstorm more effective approaches to impact management. This comes from mutual interest in genuinely finding and executing on successful impact investments, while recognizing that there are multiple ways to achieve this and we are both interested in continuous improvement. That doesn’t mean they are not critical in diligence, nor that they always choose to invest in us, but rather that their approach is always in the spirit of what we can learn from this process to get positive outcomes. They ask us: How could you be better? How can we help?
As an Impact LP ourselves, we think this way. When we meet with GPs, the questions we ask come from the perspective that we want them to be successful at driving both financial returns and impact -- since collectively, we are all part of the impact investing industry, which needs credible, high performing managers to be successful. That means we are transparent with our feedback, even if it’s critical, as we know that it will help those firms genuinely looking to drive impact alongside financial returns.
Beyond feedback in the normal course of conversation, we also often offer GPs resources and suggestions to improve their impact management. This may include introductions to trade associations (e.g. Impact Capital Managers), formal training (e.g. Impact Frontiers), and even peer GPs that are on a similar journey. For managers that are willing to open their books up to us beyond what is typically in a data room, we’ve been involved in reviewing their memos and diligence to give suggestions on deepening their approaches to impact assessment, measurement and management. These are a great use of our time, because we can directly help managers be more impactful, and we can also learn new tools to apply to our own investment process.
Of course, we know that collaboration can go beyond impact as well. In particular, being an emerging manager or impact whisperer comes with its challenges. Therefore, we often give suggestions about fundraising and make introductions where we think there is mutual interest. We want to have a positive impact on managers, and therefore our time spent with prospective GPs is not just about our own investment process and needs; we listen to what they need and try to add value where we can.
Ongoing Engagement
Impact LPs don’t stop paying attention to impact after their diligence ends. They stay attuned to it throughout the life of the relationship. When we hear from the Impact LPs in our fund, their questions are just as likely to be about impact as about financial returns. They want to know what we’ve learned and how we’re engaging with our companies and funds, like they engage with us. They want to confirm that we are still all on the same page in our combined journeys to align financial and social returns. They want to learn from us and share what they’ve learned from others in this young industry.
We feel the same way and have become immeasurably smarter about what it means to be a successful impact investor through ongoing engagement with our LPs as well as our GPs and portfolio companies.
Our engagement with GPs deepens after we’ve made a commitment. This starts by our commitment to read what they write and distribute. This sounds like table stakes, but we know that very few LPs read impact reports. In contrast, we make a point to share formal feedback on every GP’s report. We also reach out for a formal meeting every quarter at a minimum. This gives us the opportunity to continue asking critical questions, but also be available to answer questions the GP has for us. We are here to help managers navigate impact management as it grows more sophisticated - we are learning and growing together.
In addition to our own engagement, we look to bring more resources to the manager’s practices. This includes making formal connections and hosting meetings between our GPs so that they can learn from each other. We also create and serve on Impact Advisory Councils, which are an important mechanism for GPs to receive feedback from multiple perspectives. Managers also frequently call us for input on important decisions related to impact management, including hiring team members, investing in measurement resources, and joining industry organizations. While we are proud to be a trusted resource, we also gain much from these discussions as we are continuously looking to improve our own practices.
We will continue to strive to become a best-in-class Impact LP -- we appreciate our LPs who are with us in this quest, and we welcome all others to join!
Bernstein Private Wealth Management Deepens Partnership with Impact Engine
Bernstein Impact Alternatives II fund will invest in venture and private equity funds driving measurable impact across economic opportunity, environmental sustainability, and health equity.
NEW YORK, February 19, 2025 — Bernstein Private Wealth Management (“Bernstein”), a unit of AllianceBernstein L.P. (NYSE: AB), today strengthened its purpose-driven platform as it announced the final close of Bernstein Impact Alternatives II (“BIA II” or “Fund”). The Fund, which was created in partnership with Impact Engine—an independent, women- and BIPOC-led, and employee-owned asset manager investing in venture capital and private equity strategies—received more than $40 million of commitments.
BIA II is the second purpose-focused fund offered as part of Bernstein and Impact Engine’s unique partnership. Like the inaugural Bernstein Impact Alternatives fund, which held its final close in December 2022, BIA II is exclusive to Bernstein clients and aims to combine meaningful and measurable impact across companies that are committed to improving economic opportunity, environmental sustainability, and health equity.
Bernstein Impact Alternatives funds form a part of AllianceBernstein’s Portfolios with Purpose platform. AB’s Portfolios with Purpose totaled $29 billion in assets under management as of September 30, 2024.
“We are thrilled to be expanding our partnership with Impact Engine following the continued success of our inaugural Bernstein Impact Alternatives fund,” said Alex Chaloff, Chief Investment Officer of Bernstein Private Wealth Management. “Our combined expertise is critical in meeting our clients’ increasing demand for impact-oriented opportunities that make a tangible impact across communities. Bernstein Impact Alternatives are funds that address two deeply held beliefs: that providing primary growth capital to private companies is one of the most impactful ways to invest, and that investing in private equity and venture capital will improve client risk-adjusted returns.”
Impact Engine was founded in 2012 with the goal of aligning financial returns with positive impact outcomes. The asset manager partnered with Bernstein in 2022 in response to growing demand among high-net-worth individuals for impact-driven strategies, leveraging its unique vantage point and ability to deploy capital across both venture and private equity capital stages of companies.
“Interest from private wealth investors in impact-oriented funds continues to grow and we expect the same in the coming years as more families realize the potential to align financial and social returns” said Jessica Droste Yagan, Partner and CEO of Impact Engine. “We are proud to be on the leading edge of building this highly specialized investment area that requires distinct expertise and focus, and to do so in partnership with AllianceBernstein. The need for impact capital has never been greater, and the level of innovation and entrepreneurship in the field has rarely been higher.”
About Bernstein Private Wealth Management
Bernstein Private Wealth Management advises ultrahigh- and high-net-worth clients on planning for—and living with—the complexities that come with significant wealth. Bernstein is distinguished among major wealth managers by its expertise in navigating life’s transitions through a holistic approach. A flexible process—paired with innovative research, sophisticated modeling, and cutting-edge investment solutions—also set Bernstein apart. Headquartered in Nashville, Bernstein is a business unit of AllianceBernstein, which ranks among the largest investment managers in the world, with offices in major world markets across 26 countries and jurisdictions and over $792 billion in assets under management.*
For additional information, visit Bernstein.com.
*As of December 31, 2024
About Impact Engine
Impact Engine is a women-led and employee-owned asset manager that has been working to build the impact investing industry since 2012 through investments that deliver attractive risk-adjusted returns and deep impact outcomes. Based in Chicago, Impact Engine invests exclusively in funds and companies that are driving positive impact in economic opportunity, environmental sustainability, and health equity. The firm, a Public Benefit Corporation, provides investment capital along all stages of the life cycle of an enterprise, from early-stage venture to growth and buyout private equity, and in funds across this spectrum. Impact Engine’s multi-faceted investment approach ensures that it operates at the center of the impact innovation ecosystem, giving the team unique access to differentiated, high-quality deal flow as well as comprehensive knowledge of the market. Impact Engine has over $244 million in assets under management as of 3Q:2024. To learn more, please visit www.theimpactengine.com.
Endorsements are provided by individuals who are invested in an Impact Engine fund and/or are associated with portfolio holding companies/funds and may therefore have an interest in the success of Impact Engine. No compensation was provided for the endorsements. AllianceBernstein’s assets under management (AUM) is based on the most up-to-date information as of December 31, 2024.
Media Contacts
Bernstein
Katrina Clay
Impact Engine
Maggie Stohler
Legal code: BPWM-667328-2025-01-14
Announcing our first investment of 2025
Why We Invested in Unison Therapy Services
By Sophia Friedman, Vice President for Health Equity
There are ~7.5M children with a diagnosed disability in the U.S., and special education (“SPED”) learners make up 15% of the total US student population. The number of SPED students has been growing since before the COVID-19 pandemic and continues to grow as more students are diagnosed earlier and need multiple services. Students with disabilities have been federally mandated to receive customized school support since the Individuals with Disabilities Education Act (IDEA) was passed in 1975. The IDEA law requires schools to meet Free and Appropriate Public Education (FAPE) requirements for children with disabilities. Children who fall under IDEA are put on an Individualized Education Plan (IEP) that legally requires them to have specialized instruction in their Least Restrictive Environment. As part of an IEP, students can receive specialized instruction, performance tracking & interventions, paraprofessional support and ancillary services such as speech, occupational and physical therapy. All of these services require specialized clinical staff. However, schools are structurally and operationally unable to hire clinicians to meet the demand for SPED students. As a result, outsourced vendors have increasingly been tapped to fill the supply gap.
Solution
Unison Therapy Services provides therapeutic services in Pre-K through 12 school- and community- based settings via over 190 school district partners and 12 community clinics in California and Colorado. The Company is a multi-disciplinary provider of services for children with developmental delays, autism, social and emotional developmental needs and behavioral challenges. The company currently offers services across California and Colorado, and its suite of offerings include behavior, speech, mental health, psychology, education and OT/PT.
Why We Invested
Unison Therapy Services fills a critical need for therapeutic services for students that schools are unable to fill themselves and in communities where clinician supply does not meet patient demand. While schools are federally mandated to fill certain speech, behavioral, and other therapeutic service roles, these are extremely specialized and hard to staff for, leaving schools to look to outsourced vendors to fulfill federally mandated requirements. Unison Therapy Services has a competitive advantage over others in this space in recruiting and retaining talent given their focus on competitive compensation, professional development and better matching of clinicians with districts. Further, the highly fragmented school-based market presents an opportunity for significant organic and inorganic growth. Relative to other players, Unison Therapy Services has a unique ability to provide a faster time to hire / fill school needs, maintain high quality of services and provide a diverse line of services.
Impact
Currently, school districts are unable to hire and properly staff roles to address the needs of their SPED students. As more students are qualifying for IEPs and increasingly need multiple types of support services, there is a greater need for school-based clinicians to meet this demand. However, districts are unable to properly fill gaps as they are often unable to replace in-house staff that leave due to the specialized nature of the clinicians, the unionized nature of in-house staff (and resulting inability to match clinician pay rates). Attempts to innovate around insourcing talent strategies at school districts have largely fallen flat.
As a result, Unison Therapy Services has significant impact potential as the platform helps support SPED students. Key impact & ESG merits include:
Clinician-founded company that has successfully scaled in California providing on-site care to SPED students in both school-based as well as community-based settings.
Improves access to high-quality therapeutic and behavioral health service offerings in markets where supply-demand mismatch leaves students without sufficient clinical resources.
Community business targets underserved students, in rural and urban areas, who need affordable access to special education care.
Enhances the quality of care to an underserved student base.
Creates value by prioritizing organization, care coordination, data analytics and operating efficiency.
Happy New Year from Impact Engine!
12 Sources of Hope for the New Year
Despite the year’s challenges, we are hopeful that 2025 will bring new waves of opportunity to make the world a better place.
Optimism is one of our values here at Impact Engine, and one we find crucial to be intentional about, especially during trying times. As this year comes to an end and a new one begins, we are sharing a list of small things that give us hope, and support you to find your own.
Ander: The new Netflix documentary Will & Harper - Despite what the modern world tells us, humans have an unique ability to connect, emphasize, and love each other no matter how foreign a situation might appear.
Cara: From Ann Friedman:
““Hang out with a kid…Their enthusiasm for the tiniest thing is a microdose of hope. They are growing, so is everything else.””
Demetrius: From Michelle Obama:
““So you may not always have a comfortable life. And you will not always be able to solve all the world’s problems all at once. But don’t ever underestimate the impact you can have, because history has shown us that courage can be contagious, and hope can take on a life of its own.””
Jessica: From The Marginalian:
““Don’t just resist cynicism — fight it actively. Fight it in yourself, for this ungainly beast lies dormant in each of us, and counter it in those you love and engage with, by modeling its opposite. Cynicism often masquerades as nobler faculties and dispositions, but is categorically inferior.…Like all forms of destruction, cynicism is infinitely easier and lazier than construction. There is nothing more difficult yet more gratifying in our society than living with sincerity and acting from a place of largehearted, constructive, rational faith in the human spirit, continually bending toward growth and betterment. This remains the most potent antidote to cynicism. Today, especially, it is an act of courage and resistance.””
Leslie: Puerto Rican alternative hip hop band Calle 13’s song La Vuelta al Mundo:
Maggie: From Soul of a Citizen: Living With Conviction in a Cynical Time by Paul Rogat Loeb:
““We all have our own distinct gifts, strengths, and opportunities to make our lives count. No one person is responsible for healing all the wounds of the world. The challenge is to ask what we want to stand for, and to do our best to act on our beliefs. For our choices will create the world that we pass on.””
Mohit: I have been reading this poem by the Dalai Lama - Never Give Up.
“No matter what is going on, never give up.
Develop the heart.
Too much energy in your country is spent developing the mind instead of the heart.
Be compassionate, not just to your friends, but to everyone.
Work for peace in your heart and in the world.
Work for peace and I say again, never give up.
No matter what is happening, no matter what is going on around you, never give up.”
Priya: From What If We Get It Right: Visions of Climate by Ayana Elizabeth Johnson:
““Sometimes the bravest thing we can do while facing an existential crisis is imagine life on the other side.””
Rahul: A useful reminder that we can decide how much optimism we want to bring to bear:
“I’m a pessimist because of intelligence, but an optimist because of will.””
Roger: Amanda Gorman, excerpt from “An Ode We Owe”,
“For preserving the earth isn’t a battle too large
To win, but a blessing too large to lose.
This is the most pressing truth:
That Our people have only one planet to call home
And our planet has only one people to call its own.
We can either divide and be conquered by the few,
Or we can decide to conquer the future,
And say that today a new dawn we wrote,
Say that as long as we have humanity,
We will forever have hope.”
Sophia: I come back to this piece on hope often. It’s a good reminder that in spite of all we hear and see that is negative in the world, we must not lose hope:
““It’s really a wonder that I haven’t dropped all my ideals, because they seem so absurd and impossible to carry out. Yet I keep them, because in spite of everything I still believe that people are really good at heart.””
Tasha: I share this quote with my students every year since it really captures the entrepreneurial spirit:
““Pessimists are usually right and optimists are usually wrong but all the great changes have been accomplished by optimists.””