2020: The Year of Sustainability

Over the past 12 months, our lives have changed beyond recognition. For so many reasons and for so many people, this year has been incredibly difficult. And yet, we have seen a handful of positive outcomes that are now our responsibility to nurture and build upon — and it’s these promising trends that I want to focus on today.

When compared to the beginning of 2020, our lifestyles are now radically different — for example, many of the services that we have relied upon throughout this period have dramatically improved. The other undeniable change, for me, has been recognising that the global concern for environmental and social issues is greater than ever, and is likely to continue to grow. Over the course of this year, there have been a number of life altering moments that will impact the movements for social justice and climate change irreversibly. We’ve witnessed incredible moments and opportunities for progress in the face of seemingly insurmountable odds: The world joined together to declare Black Lives Matter as the movement against systemic racism went global; we now have our first female and person of colour serving as Vice President of the United States; we saw an environmental transformation as a direct result of national lockdowns — with cities across the world reporting huge drops in air pollution and citizens in Northern Indian cities seeing a view of the Himalayan mountain rage for the first time in their lives as a result.

With this in mind I feel now, more strongly than ever, that we have a responsibility to learn from these positive outcomes and to build on them, for the sake of our own futures and that of future societies and economies. In many ways, Kinnevik has had a transformative year, and we have faced our share of challenges; but we have also found new ways to flourish. Our portfolio has experienced significant growth, as the pandemic accelerated already rapidly advancing digital trends — seemingly overnight, we saw enormous progress which we had initially anticipated taking many years to achieve. And yet, there has been one constant throughout this period, which is our continued commitment to sustainability.

What we believe

As a long-term investor, we have always worked with the next two to three generations in mind, rather than the next two to three years. With that mindset comes the responsibility to construct the kind of world in which we want to live.

Sustainability is not just ‘down-side protection’, it’s not just about ‘managing risk’, and it’s not just ‘the right thing to do’. Sustainability is fundamentally about personal and business growth, and as such is a moral and financial imperative.

At Kinnevik, we believe that long-term valuations are intrinsically tied to a businesses’ practices and principles. For example, the more diverse the group of people around the decision-making table, and the more sustainable the overall vision and business model, the more growth and returns we will see over the long-term.

For all these reasons, sustainability is an integrated part of our business model and investment process, from sourcing and assessment of new business opportunities, to ongoing development of our companies and re-allocation of capital. These deeply embedded principles set us apart from other investors, and we hold ourselves to very high standards.

We are not simply paying lip service to these values — they are the foundation of our company. And the results of our 2020 sustainability report show this.

The report

While the pandemic continues to present businesses with challenges, we’re using this time and the heightened global focus on environmental and social issues to ensure we implement positive and lasting change. We are already seeing signs that the global economic rebuild post-pandemic will include considerable investment toward achieving the UN’s 2030 Agenda. That is why we have focused so intently over the past 12 months on the UN’s programme and on working towards our Sustainable Development Goals, particularly related to climate and inequality.

We are immensely proud of the progress we have made this past year and it is my pleasure to share it with you today.

On the environment:

In 2020, we decreased emissions directly under our control, including those created during the production of energy that will eventually be used by the organisation (otherwise known as Scope 1 and 2, and business travel emissions in Scope 3) by 82% compared to 2019. Of course, most of our emissions come from business travel which has reduced significantly due to the pandemic. However, seeing the immense impact of this reduction has been a wake-up call, and we intend to work hard to keep-up the reduction going forward while balancing this with the need to work closely with our partners.

Of the emissions we did produce in these categories, we have teamed up with Climeworks, in order to use their direct air capture technology to permanently remove carbon from the environment — a fairly unique step among investors.

We are also proud to have implemented recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD was formed in 2015 and aims to provide clear climate-related financial information, so companies can inform investors and other members of the public about risks they face in relation to climate change. We are one of a small number of investors that do a TCFD report, but this year we’ve also included a scenario analysis where we have modelled our investment strategy against two potential scenarios: one in which emissions decrease in line with the Paris agreement, the other in which emissions continue to rise at current rates. We’ve taken these steps to show our investors just how seriously we take the environmental impact of not just our business, but of our portfolio companies too, and how committed we are to making well informed, sustainable and long-term investment decisions.

To build upon these positive steps, we have continued to set ourselves ambitious goals to reduce greenhouse gas emissions from our business and our portfolio. That’s why, in 2020, we set climate targets in line with the Paris Agreement to significantly decrease our carbon footprint.

On society:

I’m incredibly proud of the progress Kinnevik and our portfolio companies have made towards social sustainability and, more specifically, business diversity this past year. Tying our diversity and inclusion targets to the remuneration of our teams has only solidified our commitment in this field. Before I dive deeper into this progress, I want to also acknowledge that we need to work harder to include a wider range of underrepresented groups in our diversity benchmarks going forward — and we are in the process of incorporating this into our sustainability and D&I commitments for 2021 and beyond.

I am pleased to share that our management team is now 43% female, representing a 23 percentage point improvement to team composition. With this, we have achieved our 2022 target two years early — something to be immensely proud of!

Our portfolio companies have taken similar steps to achieve greater diversity and future success: since the launch of our diversity and inclusion framework in May 2019, the share of women in their management teams’ has increased from 20% to 29%, and the share of women on the boards of private companies has increased from 10% to 13%. We have helped to find eight female board members for our private portfolio companies over the course of the year, and have cut the number of portfolio companies with all-male management teams by half. This has been aided by our newly formed Kinnevik Greenhouse talent network, which consists of around 8,000 leaders in our key markets, of which around 70% are women, and helps us to source the best talent for our partners.

We have also been recognised as setting a benchmark for best practice in diversity and inclusion within the Venture Capital industry. We achieved a so-called level 2 certification — the highest available — in the Diversity VC Standard assessment developed by Diversity VC, a UK non-profit partnership promoting diversity in venture capital investing, and Diversio, the world’s leading D&I solution provider for investors.

But the work is never over, and we know there is still plenty to do. We are now turning our attention to achieving a 40/60 gender composition in our Investment and Corporate teams, which currently comprise 23% and 73% women respectively. Additionally, starting in 2021, Kinnevik will add a People & Culture metric to the due diligence process for all new investments. This will assess the companies’ approach and implemented structures in relation to leadership and culture, talent and performance, and diversity and inclusion.

On governance:

We have put our money where our mouth is, and are tying the results of our annual assessment of our impact on the environment, society and corporate governance to the investment team’s remuneration. For me, this was a logical step given the central role that sustainability progress plays in our corporate objectives.

In order to receive additional follow-on funding from Kinnevik, our portfolio companies must show clear progress across sustainability and ESG — and each business has a specific dashboard to support them with that.

We are also proving the point that sustainable business decisions lead to strong financial performance. Our target is to deliver an annual total shareholder return of 12–15% over the business cycle; for the full year of 2020, Kinnevik’s total shareholders returns amounted to 85%.

While we are proud of the progress we have made so far, as shown in this report, we are by no means satisfied. A core part of Kinnevik’s vision is to make consumers’ lives better, and this includes the world in which they live in, just as much as the services and products they use. This year’s report shows that we are edging closer to achieving our goals, but we are excited to roll up our sleeves in 2021 and continue to push the bar higher.