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By Dr. Sebastiaan Niels HOOGHIEMSTRA* and Iris VELDMAN, LL.M.**
In line with the recent wave of EU sustainable finance legislation, EU alternative investment fund managers (“AIFMs”), increasingly, employ “impact carried”, i.e. a “distribution waterfall” whereby carried interest is linked to “impact”. By adopting such a mechanism, AIFMs operating in the ESG space do not only express the ambition to invest sustainabily, but their (financial) interests are also tied to “sustainable impact”. This contribution provides an overview of how “carried impact” works in practice.
1. Carried Interest the (European) Distribution Waterfall
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