Palisade Impact is a new addition to the Palisade Group stable of funds, and it’s reached first close of $400 million for its inaugural fund.
The bulk of the capital has come from super funds, with the remainder from foundations, family offices and high net worth individuals.
US based firm Tideline has also come on board as both an impact consultant, as well as a partner, taking a small equity stake.
OnImpact spoke with co-founder, Steve Gross, previously from Macquarie, about the team’s impact approach, assets already acquired, as well as his views on current market conditions.
Impact Themes
With a blank canvas to raise funds and support high-impact businesses, the team has targeted the Race to Zero by identifying three high-level impact themes to target:
- Zero emissions – the energy transition
- Zero waste – Circular Economy
- Zero Inequality (specifically digital equity) – digital connectivity
While the Energy transition , and the Circular economy are well understood issues, it was the third theme, Digital Equity, that’s unique. And it’s this theme that drove one of its first investments into Gigacomm.
The digital economy is rapidly becoming central to our lives, but not everybody has the same access to infrastructure.
“Australia is a really big country, with a small population, and that’s a key challenge. We see big infrastructure investments, to deliver big projects to that small population. So, every time you have to make a change and adapt, it costs a huge amount of money, which means people tend to be slow to adapt.” Steve explains.
“What we’re seeing in other markets is a move away from this sort of centralised infrastructure to decentralised, decarbonized and digitised infrastructure, so that you can deliver more modular infrastructure to different populations to solve big problems.”
Gigacomm: Social Impact and Digital equity
Gigacomm is an independent internet service provider which is rolling out its own network, this means it can offer higher speeds than its competitors for a lower price point.
“Australia ranks about 60th in the world in terms of access to internet. And if you then drill down into lower socio economic areas, it’s considerably worse than that. The big challenge is the cost of delivery, and the clumsiness of delivery, which is down to this dependence on large-scale infrastructure.” Steve says.
And in working with Palisade Impact, the company is creating products for buildings and communities, like social housing, in order to make internet affordable to those most in need.
“Gigacomm delivers high speed modular internet through its own network, which is cheaper to run and cheaper to deliver. So the marginal cost in a particular area is small, which means it can offer internet to social and affordable housing, at a much cheaper rate than the alternative.” Steve says.
“It’s exciting, we’re working with community housing providers at the moment, looking to deliver Gigacomm services to their tenants.”
Key Investment Pillars
Once a potential investment is identified, it’s assessed against four core impact pillars.
The first is significance, which looks at the size of the problem that the asset potentially solves. The bigger the problem the bigger it scores.
Transformation: looks at how much of an impact the asset has on that problem, which explores the business itself.
Influence: this relates to the Palisade team’s impact on the business, essentially their contribution.
“We consider areas like our differentiated capital and, are we helping the business scale? What’s the role that we’re looking to play to enhance the impact that business can deliver.’ Steve says.
“It’s not enough for us to just be investing in a business that was going to do this anyway. We have to be doing something that enhances the impact of that business.”
Benefit: explores an investment’s beneficiaries, and whether it’s serving an underserved community.
A Volatile Market
Palisade has managed to raise a big fund in difficult conditions. Equity markets, both private and public, have seen liquidity squeezed in-line with central banks around the world pushing rates higher to combat inflation.
For Palisade Impact, funding may be growing scarce, but the opportunities in the impact space more than make up for it.
“It’s easy to lose track amongst the noise, but we’ve had some pretty big pieces of legislation being adopted in both the US and Australia, and that will have a big impact globally on the amount of resources that gets invested in these areas. I think it’ll create more opportunity than the capital that’s there to do it.” Steve says.
“I’m very optimistic about the space. I think, particularly in Australia, which lags the world in many areas by some 10 years, I think there’ll be a lot of catch-up over the short-term