April 20, 2020No Comments

What will the world look like after the Corona crisis?

The Corona-pandemic has shaken the entire world and altered the way we live our lives, at least temporarily. The question is: how temporary is the current state we are in? Or rather how will our lives, society and world be altered and in what ways?

The immediate consequences we see so far are lockdowns, social distancing, an overwhelmed health care system, companies shifting to remote working models, gatherings being banned and borders closing.

The events caused by the pandemic are still unfolding and the many variables make it inherently complex to predict the outcomes. Will things go back to normal or will they forever change? Predicting the future is impossible but it is possible to see some early indications of trends that are emerging. In this blogpost, we will focus on three areas that we see will be impacted and present a couple of trends regarding each area:  

  • Globalization 
  • Healthcare  
  • Employment 

1. A changed perspective on globalization 

Since mid 20th century we´ve seen an increased interconnectedness thanks to the rapid advances in transportation and technology which have had a positive impact on global trade and cultural exchange. We live in a society where it’s easy to ship goods across the world and where it’s possible, and even considered natural, to work, move and travel abroad.

While globalization indeed has helped raise incomes, rapidly develop economies and increase production of goods and services – it has also helped increase the risks of contagion, both medical and financial. The spread of Covid-19 has been accelerated by the global interconnectedness, and our reliance on globalized value chains makes us vulnerable to the effects of the crisis. Will these downsides start to change our previously positive view of the free global movement?

1.1 Monitoring and controlling the free movement 

In order to prevent future pandemics, traveling will likely come with further safety measures using methods that could have implications on traveller's privacy. We have already seen examples of nations using technology to monitor and track contagion within the population. One example is China that has used monitoring systems to identify suspected coronavirus carriers but also to reinforce quarantine behaviours, using e.g. smartphone location, face-recognition, reporting of body-temperature and medical conditions. Other countries that have used similar solutions are Taiwan, Israel and Hungary.

We may see an upcoming increase in implementation of such solutions after the crisis, in efforts to try to avoid further pandemics. For instance, Apple and Google recently announced a collaboration with purpose of providing tools that will help track the spread of coronavirus. In the future we might start seeing tech solutions for checking medical health at airport security checkpoints, or we may need to verify our “health status” using biometric bracelets or medical apps on our smartphone, before we enter a country or a public space.

1.2 From lean and globalized value-chains to buffers and backups

Companies have become more and more efficient in their production processes and many have perfected decentralized global value-chains. A lot of companies rely on collaborations and partnerships with a network of global suppliers and these setups have in many ways been greatly beneficial for companies. Notable examples are Apple that has over 200 suppliers around the world and several car manufacturers, like Volvo, Hyundai and Fiat that are dependent on components that are made in China – all companies that now have suffered from halted production. China represents 16% of the global GDP and US represents 23%, making the whole world dependent on what happens in the Chinese and American economy.

We will probably see different production setups arising with an increase in safety buffers and a greater diversification of the supply chain.

We have recently experienced the downsides and risks of global supply chains and it has become quite evident that many organisations lack backup solutions and don’t have storage or buffers to rely upon to help them overcome temporary issues in the value chain. It is likely that we will see altered strategies after the Corona crisis, where organisations will begin to plan for handling another crisis or pandemic. It is not likely that we will see companies completely abandoning global value chains, since the benefits are still there, but we will probably see different production setups arising with an increase in safety buffers and a greater diversification of the supply chain.

1.3 Increased international collaboration and cooperation

The effects of the Covid-19 outbreak demonstrate how unprepared we are to handle such a pandemic on the international level. To successfully contain the spread of the virus, international collaboration and cooperation is necessary. Previous outbreaks such as Ebola in West Africa, or SARS and MERS have served as warnings, but did not result in enough international action. This time, things are different.

Although we have seen increased protectionism during the last years, it’s possible that this pandemic will acknowledge our interconnectedness and spur efforts to work together more closely.

We can learn from our collective experiences and use that knowledge to increase our preparedness for future crises. Isolation is a key component in containing the spread of a virus, but it’s not the best way forward when preparing for future, global events.

 

2. Shifting societal priorities and strengthening the healthcare system

This pandemic has revealed how vulnerable our societies are and the importance of robust healthcare systems with sufficient resources. The fast spread of the Corona virus has forced nations to put everyday life on pause and is putting increased stress on our societal abilities to cope with the spread of the virus.

2.1 A strengthened healthcare system

The pandemic has put our fundamental societal structures to a test, and in the aftermath, we may see a re-prioritization of resources. How can we make sure that we are better prepared for a global crisis such as Covid-19? And how can governments guarantee an effective health care?

Preparedness for crisis

It’s now obvious that most countries have not prepared for a pandemic such as Covid-19. The prime minister of Sweden – Stefan Löfven - recently acknowledged that our preparations have not been adequate. During the last thirty years, Sweden has deliberately disposed of medical supplies and equipment which would have been valuable today. We believe that this pandemic offers a rapid awakening regarding the consequences of the unexpected. Hopefully, we will learn from this experience and make sure that we prepare for future crises, not least within the healthcare system.

Resources and management

Our healthcare systems have been put under great stress for many years. We believe that after the crisis there will be a healthy and necessary discussion in Sweden regarding the resources allocated to the healthcare system. There is much to be done, not least ensuring that there are sufficient medical personnel available also in times of crisis. Hopefully, we will also see a shift in how the healthcare system is managed with less politicization.

2.2 The rise of self-help health care tech

We have already begun to see an accelerated adoption of “digital doctor” services since the pandemic started. The Swedish telehealth solution Doktor.se reports that the number of cases has doubled as a result of covid-19, a trend that other telehealth solution providers note as well. The increased adoption is seen largely in the older age groups as they, due to safety reasons, should avoid visiting hospitals.

The limitations in the traditional physical health care forces an increased adoption of new digital solutions and it empowers people to take personal control of their own health care. This drives up the demand for effective home diagnostics tools, telehealth solutions and other solutions that extend the reach of the healthcare professionals. We will likely see an increase in innovation and adoption of such solutions that will enable the individual to take a greater role in their own health care, even after the pandemic.

2.3 Healthcare efficiency enabled through AI and faster innovation

AI is already having a big impact within the healthcare sector, and it will likely play an even greater role in transforming medical procedures after the Corona crisis.

AI could support in making more accurate diagnoses, mass diagnosing conditions and be used to speed up the development of pharmaceuticals. AI can also help improve the patient experience and automate hospital processes.

We therefore see an increased demand of AI solutions as they enable efficient healthcare and improves nations capability to battle future virus outbreaks. The health care sector has, compared to other industries, been slow atembracing tech innovation and entrepreneurship. A possible result of this crisis could be that technological development, innovation and entrepreneurship within the health-care sector could be boosted and receive more resources going forward.

3. The future of employment

With the spread of covid-19, came also an economic crisis resulting in bankruptcies and mass unemployment. According to Forbes, the number of layoffs in USA could reach 47 million in June 2020, which would lead to an unemployment rate of 32.1%, higher than the great depression´s worst rate of 24.9%. In Sweden, 36,800 people have been laid-off during March 2020 which is 10 times the numbers from March 2019. The Swedish minister of finance Magdalena Andersson recently presented a report estimating that unemployment would reach 9-13.5%. We can also see how lockdowns and recommended social distancing, to battle the spread of the virus, has impacted schools and workplaces where many are nowadays working from home if possible. We see these events as important change indicators for the future of employment.

3.1 Gig-Economy providing the job opportunities

The gig-economy has during the past years emerged and grown more common thanks to the larger number of freelance- and gig-platforms available in a wider area of industries. The overall shift to a more gig-oriented job market has not yet been fully carried out, where one of the main challenges for the gig-movement is the perceived lack of employment security that the work form entails.

Due to the coronavirus we are unfortunately seeing unemployment rates reaching record numbers and finding a permanent position during these times can be difficult. It is quite possible that many, whom prior to the mass-unemployment rate have been unwilling to take gig-jobs, will need or even prefer to make the move into gig-economy. The shift to gig-work may either be of necessity, opportunity or due to a shifted perception of job security and the trend will likely be more common with younger professionals, within tech and consulting professions.

Short term we will see an increase in the number of job seekers, but eventually employers will slowly be able to engage in lighter investments again, resulting in more job-opportunities. The immediate resource needs in society due to lock-down are within delivery, health sector and e-commerce, however the future might create new job opportunities, as we will need to increase our crisis-mode capabilities both within organisations but also on a governmental level.

3.2 Will the entrepreneurship trend die out?

We have during some years been able to observe a growing trend of entrepreneurship, where an increased number of people have sought out to start their own ventures. The small businesses owners are badly hit by lockdowns and shops and restaurants are as a result going out of business. What will happen with them after the crisis, and will this result in the end of entrepreneurship?

We believe that entrepreneurship is a state of mind and this pandemic will bring creativity out of people. Entrepreneurship will not die, it will evolve.

A crisis tends to fuel entrepreneurship and innovation, and a disruption of current magnitude in the market will create new opportunities. Many digital tech entrepreneurs are currently flourishing, and we will most likely see many more enter the growing market sectors. In fact, opportunities even lie in the market of providing support to struggling small businesses during the crisis, where entrepreneurs can provide smart solutions within paytech, enabling home delivery and much more.

3.3 Digital workers and shifting work-life priorities

Due to lockdowns many companies shift to working remotely and digitally assisted. The “work from home” setup has presented organisations with some immediate challenges needed to be quickly addressed in order to increase efficiency and employee satisfaction. Even if many might initially be struggling with the new setup, there are also quite some benefits of remote work if you learn to manage it (and yourself) correctly. The increased flexibility and undisturbed working hours could enhance productivity and improve private life priorities.

We therefore strongly believe that the remote working model is here to stay, and organisations will need to manage the daily work-life differently and more consciously design the employee experience. The big move has already happened unwillingly due to the coronavirus, and now that many more have experienced the value of remote work it will become a necessity when moving forward.

Cartina recently posted an article about the topic of remote working – becoming the new normal, where a deep dive of our point of view is presented along with some recommendations for success. You find it here: When working from home becomes the new normal

What do you think the world will look like after the corona crisis? We would be interested in hearing your thoughts and ideas!

Please comment or contact us for further discussions.

April 7, 2020No Comments

When working from home becomes the new normal

- How to manage current challenges and prepare for a long-term shift

 

The pandemic is changing how we work

Undoubtedly, we are experiencing challenging times and one of many consequences of the Covid-19 virus is the large number of employees and students working from home. Far from everyone has the possibility to work from home. Among the ones who can, we see a differentiation in preparedness: some organisations already have remote working capabilities in place while others are trying to find their way. Nevertheless, every organisation faces new challenges when long-term involuntary isolation becomes the only way to conduct business.

Challenges with working from home

One of the most obvious and direct consequences of working from home is the loss of social interactions at work, which may result in reduced sense of belonging as well as missed information and collaborative efforts. In addition, lack of experience from digital collaborative tools could slow down productivity. Overall, we see a risk of declining efficiency and engagement.

The new normal

We don’t know how long businesses will have to work remotely, but we expect it to go on for a while, why we can assume that remote work will become the new normal. There is no time to waste, organisations must quickly manage the challenges related to social isolation in order to maintain or increase productivity and engagement.

 

Organisations must quickly manage the challenges related to social isolation in order to maintain or increase productivity and engagement.

 

Recommendations on how to build remote-working capabilities

Based on Cartina’s experiences from helping clients with digital transformation, we have compiled some recommendations on how to quickly build remote-working capabilities.

1. Engagement through inclusiveness and presence

Being physically isolated from you colleagues for a long time makes it important to ensure inclusiveness and presence in your organisation. Here are some of the keys to employee engagement and well-being:

Visible leadership

During a crisis, it’s important for leaders to be even more visible, accessible and present. Even if you cannot meet physically, leaders must show their colleagues that they are there; make an extra call, send a message, show that you care.

Timely, honest and relevant communication

Your company’s main stakeholders all demand timely, honest and relevant communication on what’s going on. Your employees want to know the status of your business right now, which decisions have been taken and what the plan is going forward. Don’t delay information which can be shared. Be honest and be relevant. Get to the point and cut the crap.

Small talk, lunches and coffee breaks

Set up social non work-related meetings and breaks. For example, at Cartina we start workdays with a morning check-in where we ask each-other how we feel and what’s going on. You can do this in a more structured way too, by asking questions such as what books are you currently reading? What has been your favourite meal this week? What are your best home workout tips? Other activities may be:

  • Setting up specific digital social gatherings where people join based on interest.
  • Online lunch-dates with random people across the business, to allow for spontaneous interaction, based on interest.
  • Digital after-works and reflection sessions.
  • 15 minutes home-training session to activate yourself and your colleagues.

2. Increase digital maturity through training

As a response to remote work, some organisations will need to introduce or expand the set of digital tools in order to secure effective collaboration. The choice of tools should be based on the collaborative needs and kept to a minimal variation. When implementing the tool, it's important that everyone is trained to reach full capacity for successful and effective meetings and collaborations.

You may be used to meetings, workshops, business briefing etc. but doing these 100% remotely while using digital tools is a different experience. To succeed, you must provide training and guidance so that everyone feels confident when it comes to leading and participating.

3. Enable effective meetings and teams

To create effective teams is a challenge. To create effective distributed teams is undoubtedly even harder. The key is communication, openness and continuous improvement. Explore what works and what doesn't for your team. Here is a list of recommendations which are equally relevant for non-distributed teams.

Effective teams

  • The team objectives should be mutually agreed and understood
  • There is a clear understanding of the different roles within a team and how they contribute to the objective
  • Continuously evaluate ways of working after meetings and in recurring improvement meetings
  • Enable psychological safety with openness and inclusion which is a pre-requisite for a culture of continuous improvement
  • Discuss and agree on WoW and working agreements within a team on e.g. communication and meeting behaviours. Should everyone mute their audio when not speaking, and how do you request to speak virtually?
  • Visualise result and progress to secure alignment on ongoing work 

Effective meetings and ways of working

  • Create agreement within- and across teams on meeting structures and meeting purposes to enable clarity and predictability, two elements that enhances focus and productivity.
  • Set up daily stand-up meetings to start the day. It creates focus and awareness on what the team is working on and where support is needed. This is probably even more relevant with distributed teams. Daily stand-up is a form of status meeting.
  • Try to shorten the meetings as much as possible, as it's difficult to focus for longer period online.

4. Create a seamless employee experience with mapped employee journey

When remote working becomes the norm faster than companies had prepared for, we believe it’s important to take a holistic approach of the employee experience. Make the investment and explore the real implications and values of remote work based on your company’s goals and people strategy.

 

The modern organisation will need to prepare for an entirely remote and digital employee experience.

 

The modern organisation will need to prepare for an entirely remote and digital employee experience, touching everything from recruitment to the employee leaving the company. However, it’s essential to define a digital employee journey that reflects the specific company values and culture which generates a sense of belonging and purpose. What makes this business stand out from others, and why should an employee stay? We believe that this step is essential for understanding and creating the best foundation for a fulltime shift into becoming the digital workplace of the future.

5. Becoming agile provides a structured approach to collaboration

The agile transformation requires substantial effort, but generates great value and prepares the business for the unknown thanks to its systematic approach to/view of e.g. organisation, leadership and ways of working. There is a lot to be said about agile organisations, which we will not address here. And you are probably wondering, what does agile organisations have to do with remote working capabilities?

 

Successfully scaled agile organisations also provide clarity and alignment on business purpose, prioritised initiatives and objectives and a structured approach to collaboration across and within teams.

 

We believe that remote working capabilities benefits greatly from the collaborative- and distributed decision-making capabilities maintained in the agile cross functional teams.Successfully scaled agile organisations also provide clarity and alignment on business purpose, prioritised initiatives and objectives and a structured approach to collaboration across- and within teams which generates predictability and enables focused efforts. Our view is therefore that agile organisations and the associated leadership-style, “the servant leader”, provides a good foundation for productive and effective work despite location – remote or onsite. The current situation could provide an opportunity for your organisation to start exploring what agile could mean to you and what benefits could come from changing your ways of working.   

In summary, it is likely that remote-working capabilities is not a temporary solution, but rather a long-term capability needed due to the lifespan of covid-19 pandemic and could be changing the future of work. We believe that remote-working capabilities does not only consist of a set of tools to be used in a certain context, moreover it's about leadership and ways of working, why we hope that your business will take the time to build the needed organisational capabilities to prepare you for the future of work.

Do you have ideas or would like to discuss further how you can build remote working capabilities through agile practices and employee journey mapping, don't hesitate to connect with us.

March 31, 2020No Comments

The value of fact-based decisions in times of crisis

"I've been in this business for 20 years and I've never seen anything like this before. Our revenue has decreased with over 90% and it's uncertain when and if it will go back to normal again. What should we do?"

 

We received a call last week from one of our clients, in which they expressed their concerns about the current market situation. As we are all being affected by the spread of covid-19 in many ways, it is easy to relate to the unfortunate and distressing situation that many businesses are facing today.

Six months ago, climate change and extreme poverty were two of the major global threats on the world agenda, however the world is currently facing another enemy, which is the global pandemic caused by the fast spreading coronavirus called Covid-19. Not only does this pandemic pose a threat to many people’s health and lives – it has also turned out to have big ramifications on the global economy, on politics, societal functions and the livelihood of countless people, resulting in mass unemployment.

Companies and business leaders are currently faced with a great level of uncertainty and are forced into quick decision making in order to survive, why access to relevant and accurate information is necessary. The stakes are high, and decisions made today may impact many employees, customers, owners, suppliers and business partners for months or even years to come. How we deal with information is therefore crucial for making well guided decisions.

 

How can we ensure that information is being processed correctly in order to maintain a balanced perspective, when we are overwhelmed with information from different sources, often influenced by a high level of fear and urgency?  

 

When analysing information it's important to be aware of potential biases and data gaps. The book Factfulness: Ten Reasons We're Wrong About the World - and Why Things Are Better Than You Think, written by Hans Rosling together with Ola Rosling and Anna Rosling Rönnlund in 2018, describes the pitfalls of interpreting information and the principles presented in the book are relevant for supporting fact-based decision-making.

For instance, there are three key things that are emphasized in the book to help us maintain an accurate view of the world:

  1. Realize that we don’t see the world as it is.
  2. Recognise what types of stories trigger our dramatic instincts.
  3. Use simple rules of thumb to resist over-dramatic stories.

One of the core messages in Factfulness is that it's easy to misinterpret information about the world, leading to an overdramatic worldview. The reason for this is not necessarily because the information we receive is wrong, but rather because it's taken out of context or only one side of the story is being presented. It is true that the situation we are currently facing is serious, but it is in uncertain and frightening times that it is even easier to make hasty and drastic decisions based on misinterpreted information.

Given our experiences from working with data-driven organisations and decision-making, it's very clear that our instinctive behaviours as humans and the way our minds function sometimes get in the way of drawing accurate conclusions based on data. Even organisations that have processes and tools in place for utilizing data effectively, experience challenges in interpreting data and turning it into fruitful actions.

If we revisit our client, who experienced a dramatical stagnation of revenue due to the current Covid-19 crisis: how could they implement a fact-based approach when deciding what actions to take? Here are some thoughts and suggestions:

1. Look at your options

No matter how grim the situation, there are always options. What are your options, and what are the implications? Developing and analysing different scenarios, not forgetting to take several perspectives and consequences into account is a good starting point. It is easy to make the mistake of only considering a problematic situation from a certain perspective and therefore disregarding potential consequences in other areas.

2. Check your information

What information do you have right now and what information do you need in order to make an informed decision? How can you bridge the gap? How reliable is the data you have and where does it come from? Does your organisation have access to data and analytics tools that can provide a new perspective? If you do not have it in-house, can you get the support or analysis externally?

3. Insights

Are you generating valuable insights to lay the foundation for better decisions? How do you connect the dots? What context are you putting the information in? It's important to keep in mind that the situations we're facing today are extreme and not necessarily the new normal. That doesn’t mean inaction is the way to go, but it is also crucial to maintain the long-term perspective of what to do when the circumstances stabilize again. Advanced analytics can support in providing actionable insights.

4. Action

Information should lead to action, otherwise you’re doing something wrong. If your insights are not actionable, the analysis may not be right. Sometimes more information can leave you feeling confused, but that is when data analytics and methods to interpret and present information can be useful.

5. Rear-view mirror

What do you see when looking in the rear-view mirror? Was the decision you took right? Have your received new information which should lead you to change the decision you made? If so, do that. When working in a data-driven way, the key is to continue to evaluate and measure success. What effects did the actions you took have on your business and performance? Feeding these insights into the loop are crucial for future decision-making and to improve the process.

At Cartina we help clients improve their decision-making processes. We do this by means of advanced analytics and digital transformation (e.g. with BI, AI, agile ways of working), information management, as well as understanding changes in customer drivers and behaviours to plan for future scenarios.

Do you want to discuss your plan to counter this crisis?

We’re here for you!

__________________________________________________________________________________________________

You can find more information about Factfulness and the 10 Rules of Thumb to keep your dramatic instincts in check here: Gapminder.org

February 21, 2020No Comments

What characterizes successful companies in 2025

Top 5 risks for the global economy are all related to the environment

The World Economic Forum annual meeting was held in Davos In January 2020. In their report of the most likely risks that will affect the global economy, all of the top 5 risks are related to the climate and environment:

  1. increased occurrences of extreme weather
  2. the after effects that will follow if we fail to act on the climate changes
  3. natural disasters
  4. loosing biodiversity and ecosystems
  5. environmental disasters caused by human

We wanted to know better how companies should act in this wave of sustainability change needed. And what characterizes a successful company in the year 2025 (5 years from now and 5 years left to reach the goals of agenda 2030)

4 trends that affect companies with regards to sustainability

In Sweden we have identified 4 trends that affects companies with regards to sustainability and pushes an increased focus on it regardless what company or industry.

International & institutional capital flows towards sustainable investments

The biggest owners on the Swedish stock market are putting their weight behind sustainable investments.

One example is BlackRock that emailed all the CEO's that climate risks are investment risks

Another example is Swedbank Robur who issued a new policy in november for sustainable investments

Regulatory expansion within multiple areas

EU taxonomi is to be implemented in 2021. And of course we have Agenda 2030.

In Sweden we recently received an updated version of the Swedish Code of Corporate Governance that includes stricter regulations around sustainability reporting.

Customer behavior changes with increased awareness

The Greta-effect. And it is not just B2C. For B2B consumption there are now more demands on suppliers.

Even though the end consumer is aware, they are not consistent in the purchasing behavior. This indicates that we are in the early phases of this trend.

Transparency is required for all stakeholders

Both B2C and B2B consumers want to know that the product and services they buy are sustainable.

Employees and partners want to know how the companies act.

Broad study of 40 of the largest and most well known Swedish companies

These trends definitely have a big impact on companies. With this in mind we wanted to understand better how far companies have gotten and what they think of the future.

We interviewed 40 of Sweden’s largest and most well known companies across multiple industries. The interviews were conducted with Owners, Board members, CEOs & Sustainability directors.

  • finance
  • insurance
  • construction
  • energy
  • real estate
  • infrastructure
  • forest industry
  • car industry
  • manufacturing industry

The interviewed individuals and companies are kept anonymous to get as honest picture as possible.

The result of the study lead to 6 main observations that both brings up the current situation and what they think is critical in the future to still be a successful company in the year 2025.

Want to have a successful company in 2025? Then these are the 6 areas to work with

You best-before-date

It's about profit

Smooth choice

Keep it real

Bye bye silo

Measure and score

Conclusions

We are in the midst of a huge shift. You need to be prepared for when the wave hits in your industry so you are able to ride on the wave of change happening.

Your company need to go from business as usual to a constant "business as unusual"

Do you know when you get hit by a tipping point?

How long will you be relevant for customers, employees and investors?

For how long will you be able to continue with your current business model?

We have a ton more interesting material that we would like to share and help your company transition and become a successful company in 2025! Contact me if you want to meet and discuss more.

 

January 14, 2020No Comments

Impact investment and responsible investment – what is it all about and when does it make sense?

Digitalisation has largely changed the conditions for doing business.

Some talk of a fourth industrial revolution that will redefine not only business but also how we live, work and relate to one another. It can easily be argued that a parallel, yet highly related trend, is the aspirations to build a more sustainable society, through more responsible business. And perhaps even more than that, business that not only settles with avoiding being part of the problem - but attempts to be part of the solution. It is within that context we should look at impact investments.

 

Is there a business in making a difference?

When we decided to half the size of our bags of maize seeds, we reached a new category of customers – smallholder farmers. You may call it impact investment, I call it business.

- CEO of seed company, Southern Africa

Those were the words of a CEO of a seed company in Southern Africa, that I spoke to a few years ago. You’ll find plenty of similar examples from emerging markets around the globe. It may be about doing good but the main driver is rather that poor people are also customers and if you sell enough you make a good profit.

This is crucial for the telecom industry in for example Africa and increasingly so also for the energy market where small solar panels are sold or leased out at an impressive pace. So, does investing in a mini-grid in Zambia or a wind-farm in Sweden make you an impact investor? Not necessarily.

There are plenty of definitions trying to grasp the meaning of impact investment.

Generally they refer to financial investments that generate a return in both financial and other dimensions. Those other dimensions can often be characterised as either Environmental, Social or Governance (ESG) related. Often impact investment is characterised by:

  1. An expectation of a financial return on investment (though it doesn’t always have to be at pair with market rate) as well as
  2. An expectation of the investment having a positive impact on society and/or the environment. Sometimes an ambition to measure the impact is added as a third characteristic.

Investing in a wind-farm becomes an impact assessment only – it can be argued - if the investor is prepared to accept a trade-off between ESG-impact and financial return. If an investment is done only on financial grounds and regardless of its impact on environment or society, it’s consequently not an impact investment. Which does not exclude, as the quote from the CEO of the seed company above illustrates, that it can have a hugely positive impact on planet and society.

Responsible investments can be said to differ from impact investment...

...in that the former focuses on reducing the negative impact of an investment, while the latter goes a step further by explicitly wanting to have a positive impact. Responsible investments are often about excluding e.g. weapon production, fossil fuels etc. (often called “value-based exclusion”). It may be assumed that most impact investments are also responsible investments, though in theory it doesn’t have to be that way.

When a responsible investment becomes enshrined in the business strategy of a company regardless of financial implications it may no longer make that much sense to distinguish it from impact investments. Some companies argue that

Is there a business in making a difference?

Whether we are obliged to by law or not, we see it as a necessity, or a hygiene factor if you wish, to behave responsible; to pay our labour a reasonable salary, to avoid virgin materials and so forth.

- CEO of medium sized Swedish company, interviewed during a market research study

Even though use of non-renewable resources would have increased profit, the company choose another route. A route they consider as a long-term sustainable route.

Is there a price premium associated with sustainability?

There are also plenty of companies and investors choosing an ESG route because they believe there is a price premium in sustainability. The issue of price premium is a little complicated though:

Academic and industry research strongly suggest, notwithstanding a selection of non-negative and contradictory results, that incorporating ESG metrics may increase risk-adjusted returns. Our results, however, would indicate that any benefit from incorporating ESG credentials into a portfolio is already captured by other well defined and known equity factors. An ESG-tilted process does not deliver higher risk-adjusted returns, since, once we remove the market cap and volatility bias, ESG as an equity factor has returns compatible with noise (t-statistics of less than 1)

- Breedt et al, The Journal of Investing

As the quote above illustrates ESG is, despite all the talk and a fair amount of research, still not considered a traditional factor in investments. This may be because there still isn’t any solid evidence that high ESG scoring in investment portfolios results in higher stock value. It doesn’t behave like other traditional factors such as value, size, volatility and quality.

There may be several reasons for the lack of strong correlation between sustainability and value but it should not automatically be assumed that ESG – or sustainable business – does not, under certain circumstances, yield higher returns and a higher stock value.  Looking at some of the research generated using the Sustainability Accountant Standard Board´s, (SASB) materiality index reveals some fairly solid evidence that ESG actually can generate material value. But: you need to know what to look for.

Some questions you should ask if you are interested in impact investment

So, if you are an investor wanting to apply an ESG approach, wanting to have a decent financial return on investment as well as an impact beyond profit the following set of questions may be a good start:

  1. What factors or parameters to look for in order to ensure a return and what kind of return are you expecting? This question is dependent on what time perspective you have, which - needless to say - also impacts risk and volatility.
  2. What kind of impact are you interested in? And how do you ensure you get “good value for money”, i.e. that your investment is efficient enough regarding the impact that you are expecting?
  3. How do you expect to measure your impact beyond financial profit?

Many investors are prepared to lower their expectations on their return slightly, if they also know that their investments have an impact on for example the sustainable development goals. This may partly be out of solidarity, but it sometimes also stems from a belief that impact investments also contributes to the betterment of the world, including the stock market. An expectation that their investment may actually be rational in the long run. This is only true, however, as long as the investment also gives a financial return.

Very few people are prepared to lose money on their investments; then it is charity, not sustainability.


This article is written by David Wiking

If you want to know more about impact investment and surrounding areas, please feel free to contact David at:

david.wiking@cartina.se or +46 73 442 74 72

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 If you want to know more about Cartina and get in touch with our sustainability experts, do not hesitate to contact us. Reach out through the button below and we can initiate a conversation.

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Cartina has since 2013 helped both multinationals and startups translate digital opportunities into lasting and profitable business. We have since the start mainly worked with management services but are now expanding our offering with tech & design.

With a desire to develop oneself, clients and colleagues, our team of several senior digital experts take pride in delivering sustainable solutions that matters for our clients and society. 
Cartina is founded and owned by the investment firm Acacia Asset Management AB together with partners in the firm.


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