Do Fund Managers Really Need an “Impact Lawyer” For Their Impact Fund?

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July 12, 2022

This is the second in a series of articles created specifically for venture and private equity fund managers operating in the impact investing space to highlight best practices and help demystify what it means to be an impact-focused investment fund.

By Aaron Bourke, Senior Counsel and Head of RPCK’s Fund Formation practice

For fund managers seeking to set up an impact fund, the considerable energy, innovation and noise of the impact sector can be overwhelming. For fund managers approaching the space from the traditional investment arena, the tendency may be to “go with what you know” – use your standard venture capital or private equity documents and your same advisory team, and just plow ahead. In some cases this might work. But in some cases, having a lawyer with particular impact expertise can pay real dividends in the short and longer-term.

1. Do you need an “impact lawyer” to set up an impact fund and do impact deals?

You might think I’d pounce on this question with a resounding yes. But from our perspective, what fund managers need first and foremost is really good transaction lawyers and fund counsel. That’s the starting point. In our case, while we work with impact funds from the early stages through fundraising and deal execution, our team brings significant experience working with traditional funds, and we believe it’s important for a legal team to bring a fully informed perspective.

All of that being said, there are a unique set of market norms and expectations developing around impact that a non-impact lawyer will likely not fully appreciate. You need exposure to the unique issues that can come up in the impact fund context. As I said in my first piece in this series, an impact lawyer usually brings the flexibility and creativity and patience to address these issues. What’s more, an impact lawyer can often plug into the broader sector and tap into her or his network to bring in other impact lawyers with specific areas of expertise, then quarterbacking the expanded legal team.

We take the view that you want senior attorneys who can bring seasoned fund and deal experience and will deliver the kind of client service impact deserves. It shouldn’t be pro bono or run by junior lawyers. Impact funds require more.

In short, being an excellent impact counsel starts with being an excellent attorney, but it also requires knowledge of the impact marketplace and how to facilitate impact outcomes.

2. Developing an impact mindset will help keep impact outcomes on track

One of the biggest differences between traditional deals and impact deals is that in traditional deals the singular objective is usually to get as good a financial deal for the client as possible. But in impact deals both sides are aligned by their mutual interest in advancing impact outcomes, which means that that the “us vs. them” paradigm of traditional deals doesn’t translate well. This is where an impact mindset comes into play, and having a lawyer who shares this mindset can be instrumental in ensuring the integrity of a deal over the longer-term. In fact, the traditional lawyer who has built his or her reputation by extracting every pound of flesh from the other side of a transaction may not have the deftness of touch that you need to achieve the collective objectives in an impact deal.

It may sound touchy-feely, but there are very tangible circumstances where an impact mindset helps. For example, if a traditional deal goes sideways or a portfolio company breaches some of its covenants, the fund manager has multiple options for recourse. In an impact deal, they may have the same options, but may ultimately decide not to enforce a breach and rather take a different tack so that they keep the impact outcomes on track. For example, in the case of a blown loan covenant, the fund manager may be incentivized to help the portfolio company find bridge financing not just to protect its investment but also to ensure that the impact outcomes are achieved.

In the next installments of our Fund Manager Series, we will explore issues such as regulatory frameworks impact fund managers need to consider and a primer on doing debt financing in impact. If you have any questions about this post, please feel free to contact me at




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