Sustainable growth – developing new solutions and transforming the present
Pia Santavirta
Without any doubt Finland needs sustainable growth. We need companies that create jobs and wellbeing, and that solve the big challenges of our time by developing new solutions and transforming existing ones. As an investor, our primary task is to accelerate the growth of these companies.
Although the global economic situation is challenging in many places, there are things heading in the right direction: sustainability and responsibility are now on the agenda of every growth-seeking company. In our partnering with growth companies, we are closely involved in developing actions and systems that will enhance sustainability.
At Tesi, there are two dimensions to our overall sustainability: responsibility and impact. Responsibility refers to the responsibility for our own activities with regard to the environment, the economy, people and corporate governance. Impact, on the other hand, consists of the positive benefits of our operations for the wider community and the environment.
As a venture capital and private equity investor, we do not operate with our own supply chains or production plants, but with our portfolio companies and funds. Therefore, our best opportunities for making an impact are in developing the sustainability of the funds, startups and growth companies in which we invest.
We reach a substantial number of companies through our investment operations: we are an investor, either directly or through our portfolio funds, in some 560 Finnish growth companies that together employ tens of thousands of people.
We address sustainable growth from two perspectives. Firstly, we invest directly in companies that through their core business promote, for instance, the clean transition. This is one focus of our investment strategy: around two-thirds of our direct investments are in companies driving the clean transition. Secondly, we invest in companies with the potential to transform their operations or that are spearheading sustainability in their sector.
While sustainable growth is certainly at the core of our operations, we should bear in mind that the world around us is not yet geared up: the goal of zero emissions will not be reached in a day, in a week or even in months. Change takes time. So to achieve carbon neutrality, for instance, we must seize opportunities on all fronts. In practice, that means investing in companies just starting on the road to sustainability but committed to improving the sustainability of their business.
Sustainability is embedded in our entire investment process
Our investment teams are in constant dialogue with a wide variety of companies and investor partners. Multiple criteria are applied to screening investments including, for instance, the scalability of growth and the impacts of the company’s core business. Sustainability is also reviewed right at the start in the initial discussions.
Sustainability is addressed throughout the investment process. In the case of fund investments, we conduct responsibility analyses and we monitor the responsibility of general partners. For direct investments, we pre-evaluate sustainability and impact, conduct a sustainability due diligence, and set concrete ESG development targets for our portfolio companies. Here, also, no standard template is used. Because our portfolio companies operate in different sectors and are in differing stages of growth, it is important to identify and pursue the main development targets for sustainability.
Although we have at our disposal a highly systematic method of evaluating the sustainability of an investee, the company’s management must be genuinely committed to sustainability targets. If it is not, we do not invest in that company or fund.
Sustainability also bestows a competitive edge. A stricter regulatory framework requires all large companies to report more details of their supply chains. If a growth company wants to compete for all possible customers and partners – and why wouldn’t it? – it must prioritise responsibility aspects and report its sustainability activities and procedures.
PS. Help with your sustainability activities is readily available – check out our free sustainability tools that will facilitate your ESG work. They are downloadable from our website.
Tesi (officially Finnish Industry Investment Ltd) is a state-owned, market-driven investment company that invests in venture capital and private equity funds and directly in Finnish startups and growth companies.
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