During our recent Asset Class Deep Dive, we explored the role of private debt in impact investing together with experts from Triodos Investment Management, StartGreen Capital and FMO Investment Management.

Impact investing is often associated with equity: investing in companies that are developing solutions to social and environmental challenges. But what about lending capital to businesses and projects that are already making a difference?

During our recent Asset Class Deep Dive, we explored the role of private debt in impact investing together with experts from Triodos Investment Management, StartGreen Capital and FMO Investment Management.

From renewable energy infrastructure in the Netherlands to financial inclusion in emerging markets, the discussion highlighted how private debt can help finance the transition towards a more sustainable and inclusive economy.

What is private debt and how does it create impact?

Private debt is a form of investing where you lend money to businesses or projects without becoming a shareholder. These loans are privately negotiated and are not traded on public markets. In return, investors typically receive interest, and the borrower repays the loan according to agreed terms.

Unlike equity investments, where investors become part-owners of a business, private debt is often suited to companies or projects with relatively predictable income streams that can be used to repay a loan. Equity, on the other hand, may be more suitable for businesses that are still developing and need capital to grow, but do not yet generate stable revenues. The two are not mutually exclusive: businesses can use both debt and equity financing, depending on their needs. Private debt, like every investment, also comes with risks. If a company is unable to repay its loan, investors may lose part or all of their investment. However, some loans (senior debt) carry a lower risk, particularly when they have priority over other debts in the event of bankruptcy. These lenders are repaid before subordinated creditors, which can reduce the risk of losses.

For impact investors, private debt offers an opportunity to finance tangible projects and businesses that contribute to positive social or environmental change. Think of developing renewable energy projects, making buildings more sustainable, or helping an organic farming business expand. 

And the impact can be surprisingly close to home.

Triodos Investment Management shared examples ranging from the transformation of former sewage-treatment silos into a sustainable residential development in Amsterdam, to battery storage supporting renewable energy and financing for organic farming.

StartGreen Capital illustrated how private debt can help address the next challenge of the energy transition: connecting renewable energy generation with storage and local demand. One example combined wind turbines, battery storage and electric vehicle charging infrastructure.

Financing impact where capital is scarce

Private debt also plays an important role in emerging markets, where access to financing remains a major barrier to sustainable development. One example is microcredit, which provides small loans to entrepreneurs who may otherwise struggle to access traditional financing.

FMO Investment Management highlighted investments supporting energy-efficient heating in Mongolia, agricultural supply chains in Türkiye, and renewable energy solutions for businesses across Africa.

These examples demonstrate how lending capital can support established businesses and infrastructure projects that deliver social and environmental benefits, particularly in markets where traditional financing is limited.

What should investors consider?

As with any investment, private debt comes with risks and trade-offs. During the webinar, we discussed how interest rates, loan structures, repayment priorities and the creditworthiness of borrowers influence the risk-return profile. Liquidity is another important consideration: while some investment funds offer periodic opportunities to redeem shares, the underlying loans are often long-term investments.

For investors exploring private debt, understanding where the capital goes, how impact is measured, and what risks are involved is essential.

Curious to learn more?

Private debt offers another way for impact investors to put their capital to work, particularly by financing businesses and projects that are ready to grow or expand their impact. But how does it compare with equity? What returns and risks can investors expect? And how can private debt complement an existing impact portfolio?

These are some of the questions we explored during the webinar.

Watch the full recording to hear the practical examples and insights shared by our speakers.