Our investment strategy goes beyond responsible investing to focus exclusively on opportunities where a pressing social or environmental need creates a commercial opportunity. We look for opportunities where our funds can support investable solutions to pressing social and environmental challenges.
First, we look to select investments where we think impact and growth can go hand-in-hand; i.e. where creating societal value can also drive financial value. Over time, we’ve learned to focus on four impact ‘themes’: stronger communities, healthier lives, future skills and sustainable planet. Within these themes, we start by identifying what the specific challenges are; we look at who is being affected, and we establish what kind of support they need that they are not currently getting.
Over the last two years, we also improved our sourcing methodology and we developed our thematic sourcing by using the SDG to focus more on outcomes. Over 17 years of investing for impact, we have developed a deep understanding of the key challenges within our four impact themes. We used this experience to review the 169 targets contained within the 17 Sustainable Development Goals, and identify the areas where we felt that private market solutions were most likely to generate positive change. We then agreed the sub-outcomes we wanted to target within these areas. This focus on specific sub-outcomes has helped our team better understand the key drivers and levers of change – which in turn has helped us identify opportunities and win deals.
Secondly, we ask ourselves:
- Can we find an investment that addresses this challenge, either through its product, its location, or its business model?
- Can we identify a suitable partner, entrepreneur or management team to help us deliver it?
- Can we build something together that will ultimately deliver better outcomes within our impact themes?
This approach enables us to spot high-impact opportunities whose growth potential is driven by societal needs, often in areas where others are not looking. It also enables us to develop domain expertise in specific sectors and sub-sectors – and to build relationships with management teams, particularly those with a strong sense of purpose in sectors like healthcare and education. As part of our due diligence, we conduct a thorough assessment of the potential impact risks and rewards. We use this analysis to identify where we may need to protect value – and where we can exploit untapped growth. It subsequently becomes the basis of how we engage with business owners, management teams and joint venture partners, as we look to establish and execute our strategy. To further inform this engagement, we track the performance of our investments against a set of pre-agreed indicators. This data helps to drive timely management decisions. It helps our portfolio companies communicate the societal value being created to others (such as customers, employees and suppliers), enabling them to build a strong and sustainable stakeholder base – thus optimising the business for exit. And in the longer term, it helps us invest more effectively, by giving us a better understanding of how to tackle particular challenges. Taken together, this helps us to drive better outcomes and create value throughout the investment process, resulting in better returns for our funds.
Bridges also has a special focus on the Impact Management Project, a unique global collaboration facilitated by Bridges Insights, with the aim to agree on some common fundamentals for how we talk about and manage impact. Based on those fundamentals and principles agreed, we have reviewed and updated our own investment approach and align where possible to demonstrate best practice.