Private credit has matured into an established asset class and is now evolving beyond traditional financing, offering opportunities to contribute to positive change. As investors increasingly seek to align returns with measurable positive outcomes, Allianz Global Investors has launched its Impact Private Credit strategy in July 2024. The strategy finances small and mid-sized European companies whose products and services address environmental and social challenges, aiming at demonstrating that meaningful impact can be achieved without compromising financial returns.

The New Drivers of Impact Credit

Impact investing, including within private credit, is gaining momentum as global awareness of climate change, social inequality, and resource scarcity continues to rise. “There is a growing appetite from investors, as there is growing awareness among individuals about climate change and social inequalities,” says Alexandra Tixier, Lead Portfolio Manager of Impact Private Credit at Allianz Global Investors. “We can no longer deny that climate change is happening, and this awareness is shaping how investors want their capital to work.”

“We can no longer deny that climate change is happening, and this awareness is shaping how investors want their capital to work.”

Alexandra Tixier, Lead Portfolio Manager of Impact Private Credit at Allianz Global Investors.

Regulatory initiatives and rising transparency requirements are further accelerating this shift, compelling investors to demonstrate measurable outcomes rather than rely on broad ESG statements. “Regulation is not necessarily pushing for impact investing, but it is pushing for more transparency,” explains Tixier. “And greater transparency ultimately means that if you want to show better results, you need to invest in a better way.”

Beyond regulation and awareness, a generational shift is also reshaping how capital is allocated. “The next generation of investors, more conscious of sustainability and increasingly represented on investment committees, is taking stronger positions at the LP level and driving decisions toward intentional impact,” according to Tixier.

From Equity to Credit: A New Lens for Impact

Impact investing has long been embedded in private equity, where ownership allows investors to shape company strategy and governance. In private credit, where investors are lenders rather than owners, influence has traditionally been viewed as limited. “The market used to believe that if you’re not an owner, you can’t drive change,” says Tixier. “We strongly believe the opposite. Even as a direct lender, you can drive change by allocating capital only to the good companies, and onboard them on the impact journey.”

“The market used to believe that if you’re not an owner, you can’t drive change. We strongly believe the opposite.”

Alexandra Tixier, Lead Portfolio Manager of Impact Private Credit at Allianz Global Investors.

Impact investing in private credit first emerged through blended finance initiatives, primarily channeling capital to companies and projects in emerging markets. “If you look at private equity, impact investing has been much more developed in developed markets, whereas in private credit it’s been the opposite,” observes Tixier. This imbalance created an opportunity for Allianz Global Investors to pioneer a new approach. “We saw clear room for growth in developed-market impact private credit,” she explains. “Private equity often develops first in a given area and paves the way for direct lending, since private equity and direct lending work hand in hand.”

From ESG Integration to Intentional Impact

Across the spectrum of ESG integration, approaches range from basic risk mitigation to full-scale impact investing. Traditional ESG integration focuses primarily on identifying and managing sustainability risks within the investment process. “ESG integration is about identifying and managing ESG risks within the credit analysis,” explains Tixier. 

The next level is sustainability investing, focused on companies willing to improve their environmental or social practices. “These strategies aim to support the transition of companies, setting annual targets to reduce emissions or improve operations,” she explains. “It’s about changing how companies operate.”

“Impact investing is about narrowing the investment universe to companies that provide real solutions.”

Alexandra Tixier, Lead Portfolio Manager of Impact Private Credit at Allianz Global Investors.

At the top of the spectrum lies impact investing, where investors intentionally select companies whose core products or services address environmental or social challenges. “Impact investing is about narrowing the investment universe to companies that provide real solutions,” says Tixier. “We finance these companies to help them grow and scale because their business model itself creates positive change.”

Turning Intent into Action

Impact investing goes beyond simply selecting and financing good companies; it also involves guiding them along their impact journey. “It’s about engaging with the company and its sponsor to define and measure their positive outcomes,” explains Tixier. “We work closely with management teams to identify clear, measurable KPIs linked to products or services, ensuring that the impact we generate is tangible and transparent.”

The universe of eligible companies targeted by AllianzGI’s Impact Private Credit strategy falls within three core themes: climate change, planetary boundaries, and inclusive capitalism. The first, climate change, focuses on companies that provide solutions to mitigate global warming and help their clients reduce CO₂ emissions. The second theme, planetary boundaries, encompasses all other environmentally related areas such as sustainable agriculture, circular economy, waste management, and the reduction of pollution, water, and energy consumption. The final pillar, inclusive capitalism, focuses on the social dimension. “Here, we seek companies that bridge inequality gaps by improving access to quality healthcare, education, and affordable housing,” Tixier explains.

Although launched only in 2024, AllianzGI’s Impact Private Credit strategy has already financed several companies in sustainable agriculture and waste management, including one in Finland. One notable example is a unitranche financing provided to a company developing biological pest control solutions that offer growers targeted and effective alternatives to chemical pesticides. “This borrower is essentially raising insects that can fully replace the use of chemical pesticides,” explains Tixier. “By substituting chemicals entirely, we can quantify the results. For every million euros of revenue, we can calculate how many tons of pesticides are avoided.”

Impact Without Compromise

Historically, many investors assumed that targeting measurable social or environmental outcomes would mean sacrificing returns. Tixier challenges that notion directly, arguing that impact and performance can and should reinforce each other. “We aim at not compromising between impact investing and returns,” she emphasizes. “We are pricing at par, aiming to deliver market-rate returns while financing companies that create positive change.”

She explains that this principle is embedded in the very design of the strategy, developed in close collaboration with AllianzGI’s institutional clients. “From the start, we built this product together with investors to ensure there would be no trade-off between purpose and performance,” says Tixier. “That no-compromise approach materializes in the way we price our loans, on standard market terms, proving that impact does not require concessionary capital.”

“From the start, we built this product together with investors to ensure there would be no trade-off between purpose and performance.”

Alexandra Tixier, Lead Portfolio Manager of Impact Private Credit at Allianz Global Investors.

The strategy’s foundation rests on co-creation between AllianzGI’s direct lending team and Impact Strategy team headed by Diane Mak, combining rigorous credit underwriting with measurable impact assessment. “This is a true integration of expertise,” she adds. “It’s a direct lending product built with the same financial discipline as any traditional private credit fund, but with an intentional impact framework layered on top.”

A Pan-European Strategy Focused on Mid-Market Borrowers

By intentionally selecting only companies that create positive environmental or social outcomes, AllianzGI naturally narrows its investment universe. “That’s something we accept and actually want to do,” says Tixier. “But to balance a smaller eligible universe, we’ve expanded our geographical scope.” The strategy was designed from day one as a pan-European initiative.

The strategy targets mid-market companies with EBITDA typically between €5 million and €15 million, primarily in sponsor-backed transactions, though selective sponsorless opportunities are also considered. “Our pipeline is mainly driven by sponsor-backed deals,” Tixier explains. The strategy’s sweet spot for debt tickets ranges from €40 million to €60 million, with flexibility to participate in larger financings through co-investments alongside AllianzGI’s sister direct lending strategies as part of AllianzGI European Direct Lending platform. “We aim at being a one-stop-shop and a long-term partner for sponsors and borrowers.”

“Being the sole lender gives us the proximity we need to ensure that our financing truly drives measurable impact.”

Alexandra Tixier, Lead Portfolio Manager of Impact Private Credit at Allianz Global Investors.

Crucially, AllianzGI aims to act as the sole lender whenever possible, allowing for a deeper partnership with borrowers and greater influence over impact measurement and engagement. “Being the sole lender gives us the proximity we need to ensure that our financing truly drives measurable impact,” Tixier concludes.