Impact delivers competitive advantage

Responsible business and responsible investment are commonplace aims for socially aware companies and investors. Impact – in other words aiming for measurable social benefits, not only profitability – became even more of a buzzword in 2018.

Responsible business addresses the impacts of operations on the environment, people and society. Traditionally, the goal has been to measure and reduce negative impacts. The focus is now shifting more towards seeking positive impacts and opportunities. Impact investment and impact business aim to actively bring about positive social change and turn that to the company’s competitive advantage.

tony nysten

We made many investments in companies promoting a positive social impact.

TONY NYSTEN / INVESTMENT MANAGER, TESI

INVESTMENTS IN COMPANIES THAT MAKE AN IMPACT. In 2018 Tesi made many direct investments in companies promoting a positive social impact. Oura Health’s objective, for example, is to improve people’s general wellbeing and working efficiency by boosting their sleep quality and waking alertness. ICEYE’s satellite-based information, meanwhile, can be used for tracking melting ice or tree felling. One of our corporate responsibility targets in 2018 was at least one-half of direct first-round investments implementing at least one UN Sustainable Development Goal in their business activities. We easily surpassed that target.

FUND INVESTMENTS HAVE RESPONSIBLE IMPACT. At the end of 2018 we conducted a study on the attitude of 20 Finnish management companies to responsible investment. The results of the questionnaire we sent show that these players are aware of the importance of responsible investment and have taken tangible steps to promote it. Some players are already exemplary in applying responsible investment, and we are convinced of the positive impact this has on both society and monetary returns.

GREATER FOCUS ON DIVERSITY. VC investment company Atomico Ventures listed diversity as one theme of its State of European Tech report released at the Slush 2018 startup event. The report highlighted that 93% of all funds raised by European VC-backed companies went to all-male founding teams in 2018. Some of Tesi’s Finnish venture capital funds have also spotlighted diversity in investment teams and portfolio companies.

All aspects of diversity are relevant – ie, diversity in gender, age and ethnic background. Diversity is also needed on companies’ boards of directors to ensure a company has access to the most diversified possible expertise.

The educational backgrounds of Tesi’s board members are diverse. Women account for 43% of the members of Tesi’s board of directors, a higher proportion than for Finnish listed companies overall. Over 60% of Tesi employees are men, and our investment teams are even more male-dominated.

We are becoming aware of diversity challenges in our sector and portfolio companies, and making efforts to promote diversity through practical action. For example, we will map out the nationality and gender distribution of the boards of our target companies and the teams of the Finnish fund management companies in 2019. Our goal is to improve the ratio for diversity, together with other owners and the company leaders.

NEW PERSPECTIVE ON PRACTICAL ACTION. During 2018 we developed ways to put responsibility and impact into practice in our work, such as in screening prospective investments and fund management companies and in formulating value-creation plans for portfolio companies. For instance, our goal in 2018 was that at least one-half of our actively-managed portfolio companies would have a target for developing responsible business. Although that goal was not quite achieved, during the year we enhanced both our own and our portfolio companies’ understanding of responsibility issues by discussions with the companies’ boards and jointly considering measures.

Almost all Finnish management companies of our funds have endorsed the principles of responsible investment. Promoting and evaluating responsibility and impact is a long-term pursuit, and we will continue to develop our methods and procedures also during the current year.

The third corporate responsibility objective in 2018 related to deepening Tesi employees’ expertise in respect of responsible business activities. We updated our Code of Conduct, and all our Tesi staff underwent online training on it. We also arranged a workshop to specifically address how to promote responsibility in our portfolio companies.

We encourage management companies to invest responsibly.

RIITTA JÄÄSKELÄINEN / INVESTMENT 
DIRECTOR, TESI

We promote responsibility and impact in the boardwork of our portfolio companies and in management sparring. Together with other owners and company management, we address what responsibility and impact could be in each company, and we try to identify how it can be translated into a competitive edge. We want to encourage our portfolio companies to report their responsibility as well as their financial data. In the case of our fund investments, we encourage management companies to invest responsibly and to disseminate information about responsible operation in their portfolio companies.

WE RESPOND TO GLOBAL CHALLENGES. Tesi has traditionally aimed to produce beneficial social and economic impacts on Finland’s national economy and economic activity by creating jobs and helping Finnish companies expand internationally. Local impact is still high on our list of priorities, but we also want to take part in projects that solve international challenges. A central issue relating to impact is how to measure results. How can we ascertain how much impact a company’s operations have on the environment or on wellbeing? One way we have examined how to measure and manage impact is by piloting the Upright Project, a Finnish startup tool aimed at indicating the net impacts produced by companies.

To produce beneficial social and economic impact, we also decided in autumn 2018 to launch a circular economy programme for channelling capital into sustainable development. Encouraging the circular economy supports the efficient use of resources. Our sights are set on mitigating climate change and on the wellbeing of both people and the environment.

Read Tesi’s Code of Conduct