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New study: It pays to invest in sustainable start-ups

More investors in the Nordic countries are choosing to invest in start-ups that earn a profit by making a difference. Now a new study shows that investors not only gain a beneficial social or environmental value from such investments but also gain a tidy financial return. The report has been compiled by The One Initiative with support from Danske Bank.

Ambitious start-ups are currently storming ahead with solutions to some of the biggest problems on Earth – from poverty and starvation to gender equality and sustainable energy. But how are Nordic investors responding to the impact phenomenon? Are they ready to invest in start-ups that are working in alignment with the UN’s 17 Sustainable Development Goals (SDGs)? And can they expect a financial return on their investments?             

These questions are answered in the new report Nordic Investors – A survey and analysis of impact investing in the Nordics 2019, which has been compiled by The One Initiative in partnership with Danske Bank and Bootstrapping.   

Most investors who choose impact investments do so because of the possibility of getting a solid financial return on their investment: 83% of the investors who took part in the study expect their portfolio to perform on the same level or above the average market return. At the same time, 92% of these investors believe that impact investments are a great way of contributing to the UN’s societal and environmental goals.

Jeanette Fangel Løgstrup

Head of Societal Impact and Sustainability, Danske Bank

Still in its infancy  
Despite the positive tendencies, impact investing is still in its infancy, says Jeanette Fangel Løgstrup: 

"The good news is that both private and institutional investors who haven’t previously shown an interest in impact investments are now prioritising the agenda because – as the report concludes – they don’t have to compromise when it comes to the financial return on their investments."   

Need for more information and transparency 

But there is still work to be done before impact investments become mainstream. Solutions to three challenges are highlighted in the report as being essential if impact start-ups are to experience an increased willingness to invest:   

  • Better information about the market and more transparency. 
  • More data on existing impact investments. 
  • The limited exit possibilities in the impact market. 

Same business principals 
Three to four years ago, Mette Fløe Nielsen, Director in M.I.L. Invest, entered the impact world – a decision she does not regret:

I think that there are many of us who believe that we should invest our financial assets in businesses that want to solve the world’s problems. That being said, investing in impacts is driven by standard business principles: to be an attractive investment, the impact start-up needs to a have a strong team, a scalable technology or service, and drive.       

Mette Fløe Nielsen

Director, M.I.L. Invest and private investor 

Terminology scares off investors   
Mette Fløe Nielsen believes that some investors are scared off by the terminology used in connection with impact start-ups.     

“We call them all ‘impact businesses’, and everybody is incorporating the UN’s Sustainable Development Goals into their business cases. I think this scares some investors off. Do they have to use different parameters, or do they have to carry out due diligence in a different way?           

No, they do not – basically because impact start-ups are not run differently or intended to be any different than ordinary start-ups. They are ordinary businesses with two purposes: creating a better world and attaining a financial return.”     

This content is not investment advice - you should always speak to an advisor about how a possible investment matches your investment profile before making an investment.

Other Danske Bank initiatives stimulating entrepreneurship  

  1. The +impact platform, on which companies can post the challenges they face and receive advice.  
  2. The Hub, a platform that facilitates contact between investors, employees and newly started companies.  
  3. We have developed an accelerator that invites selected start-ups to a 12-week training programme that enhances their business understanding and boosts their growth potential.
  4. A dedicated network of advisors who specialise in start-ups.