A new opportunity has emerged for impact venture capital (VC) funds in Germany and Europe with the introduction of the "Impact Facility" by KfW Capital. This initiative allows VC funds that aim to achieve both financial returns and measurable social or ecological impacts to access up to EUR 15 million, constituting a maximum of 25 percent of the fund volume. These investments are subject to standard due diligence processes and conditions similar to those applied to private VC fund investors.
The "Impact Facility" represents the 11th component of the Federal Government's Future Fund, which seeks to expand growth capital finance significantly by 2030. A total of EUR 200 million is now available for impact investments until that year.
Dr. Jörg Goschin, CEO of KfW Capital, emphasized the importance of this development: “The fact that we are strengthening our innovative capacity for a better future is of great significance for the overall economy. Impact funds are particularly committed to combining responsibility and returns. They specifically direct capital to start-ups and fast-growth enterprises that develop and bring to market social or ecological innovations."
Venture capital funds of any size can apply for this facility. To ensure transparency regarding their impact focus, these funds establish specific impact targets within their portfolio companies, monitor them regularly, and tie part of their management’s compensation to achieving these targets through what is known as "impact carry."
The Future Fund aims at expanding growth capital finance through public funding and mobilizing private investment, benefiting start-ups in their growth phase with high capital needs. The fund consists of various components including contributions from the ERP Special Fund, European Investment Fund (EIF), KfW Capital, among others. To date, more than EUR 13 billion across 11 modules have been launched under this initiative.