Erik Syvertsen, CEO of Oslo-based Norselab, talks about the role of investment in building “a world in which we can have our needs met without compromising nature” and why ‘meaningfulness’ is key to their strategy.
Timeline
- 2015: Yngve Tvedt and Aksel Lund Svindal launch Norselab in Oslo as a venture studio to invest in impact driven early-stage growth companies
- 2018: The company hires Maria Grimstad de Perlinghi to build their ‘meaningfulness’ impact strategy
- 2019- 2020: Erik Syvertsen joins as CEO to scale the company and Norselab launches its first impact fund – Meaningful Equity I
- 2022: Norselab scales its fund platform with the launch of the Meaningful Equity II, Meaningful Structured Equity and Meaningful Impact High Yield funds
Oslo-based Norselab has been in the business of impact investing long before it launched its NOK 700m (€60.5m) Meaningful Equity I fund in 2020.
Yngve Tvedt, Norselab’s chief investment officer, and Aksel Lund Svindal, investment partner, originally set out to attract angel investors to invest in impact-focused industrial tech companies in Norway with the establishment of a venture studio in 2015.
A few years later, Erik Syvertsen, Norselab’s CEO, joined the company after having spent nearly 30 years in traditional asset management, latterly as the CEO of hedge fund firm Trient Asset Management. Syvertsen says he and the team saw an opportunity to establish “a more structured institutional investment platform” to attract both institutional as well as international investors “to the Nordic venture scene”.
“After 15 years of managing money and 15 years of building asset management firms, I wanted to turn my attention to managing assets with purpose,” says Syvertsen. “If we want to have any chance at meeting the SDGs, the next 10 years will be critical in reallocating capital from traditional investment avenues to plug the funding gap in businesses making more meaningful investments.”
Impact Investor previously reported that Norselab’s analyst team estimates the funding gap for Nordic impact ventures to be at around $4bn. Nordic impact startups also have disproportionately low access to funding compared to their European equivalents, with companies entering the growth phase of their development particularly affected.
Syversten says the reason for the funding gap, not just in the Nordics but globally, was due to both regulatory uncertainty and a lack of impact investment vehicles that could demonstrate proof of concept and solid returns.
But he also highlights some positive trends on the horizon, including changing attitudes to investment among younger generations, which he says would contribute to accelerating the shift in capital needed to plug the gap.
“We are in the midst of the biggest transition of generational wealth in history and a large portion of the new generation wants to invest with purpose,” he says. “But the transition won’t happen overnight.”
Talent-driven
Syvertsen explains that the company’s own structure is based on performance-driven teams focused on generating returns, the application of an impact lens using the company’s ‘meaningfulness’ philosophy, and the creation of a structured and regulated governance platform, “with all the necessary elements to attract capital, deal flow and talent”.
The focus on talent is particularly important to the company, whose decision to launch new funds and into new asset classes is determined by its team members.
Syvertsen explains: “With the platform and our meaningfulness philosophy in place our time-to-market with new investment products is quite quick. But, as with any new product, there needs to be investor demand and of equal importance, is our ability to attract top-tier investment talent. The talent we hire either bring their own product ideas or we collaborate with a partner to design the framework of a product ourselves and try to attract talent to match it.”
Expanding fund portfolio
Norselab’s portfolio is invested across Norway and the Nordic region with plans to expand to the rest of Europe over the coming years. The firm is sector agnostic and can invest in any company demonstrating a meaningful positive impact on one or more of the UN SDGs.
Norselab is currently raising money for Meaningful Equity II, which invests in early-stage growth companies with a net positive impact in global industries.
Fund II, which has secured recommitments from existing investors, has so far invested in Beefutures, a biotech firm focused on optimising beekeeping and pollination and incentivising more sustainable farming practices to combat biodiversity loss, and Wanda, a circular logistics firm offering consumers the opportunity to extend the lifetime of their belongings through a range of services from storage, maintenance and repair to buying and selling of pre-loved items.
Last November, Norselab added the Meaningful Structured Equity fund to its portfolio, which combines non-voting preference shares and stock warrants and a month later launched its first credit fund, the Meaningful Impact High Yield fund, following the hire of Tom Hestnes, a known activist investor in Norway, as managing director for credit.
Looking ahead, Norselab is planning to launch a second credit fund in the fourth quarter of this year and continue to launch new vintages of existing funds in the future.
“Risk premiums are time-varying, as are asset allocations, investor appetite and liquidity considerations, which means we seek to launch new products following market dynamics” says Syvertsen. “Our end goal is to populate a traditional balanced portfolio with a range of impact products covering a variety of strategies and asset classes.”
Maria Grimstad de Perlinghi, who joined Norselab as partner in 2018 to build the company’s meaningfulness impact management methodology from scratch, says the company’s agnosticism did not rule out the launch of thematic funds in the future if investor appetite was there.
A ‘meaningful’ philosophy
“Meaningfulness is about how we believe we can best contribute to achieving the Sustainable Development Goals and building a world in which we can have our needs met without compromising nature,” says Grimstad de Perlinghi explaining the impact philosophy followed by the company and its fund managers.
Based on three pillars, Grimstad de Perlinghi says the first and probably, the most important pillar of the philosophy is the focus on products and services.
“Unlike asset managers who focus on operational factors, we really go straight to the source of the revenue, looking at the products or services companies sell and how these contribute to the SDGs,” she says, explaining that these could also include well established businesses from traditional industries that may not automatically be thought of as impact.
She gives the example of an industrial group that is being assessed for the Meaningful Impact High Yield fund, that develops, manufactures and distributes professional lighting solutions for the global market, which include luminaries that reduce energy consumption by up to 80 to 90 percent compared to conventional products.
The philosophy also requires managers to take a holistic view and consider the full range of positive and negative impacts of companies, only investing in those with a concrete and substantial net-positive contribution to the SDGs.
“Only by considering the full range of resources a company uses and all its positive and negative effects throughout the value chain, can we identify companies that will move the needle towards a net positive world,” she says.
The third and last pillar of the philosophy is the focus on companies in global industries which can create impact on a transformative scale.
“Companies in industries with a global reach have the potential to drive systems change and large-scale impact. We want to support businesses that are trying to influence the direction their industries are taking or trying to transform them completely by introducing new and disruptive solutions,” she adds.
Grimstad de Perlinghi says that today when it comes to judging a company’s net positive impact there is no perfect data provider or combination of data providers, and that her team spends a significant amount of resources on formulating the impact thesis for each of its investments.
“We perform assessments at product level, looking at the sustainability challenge that a product addresses, to what extent this is an actual and substantial sustainability problem, and how the company’s product contributes to solving it,” she says. “To avoid subjectivity, our team of analysts review scientific research in the field to understand whether a particular product or service is actually driving the change that we need toward one or more of the SDGs.”
As a fairly young company, most of Norselab’s investments are recent and the full impact potential of its holdings has yet to be fully materialised. Nevertheless, Grimstad de Perlinghi points to Ava Ocean, a recent investment in the Meaningful Equity I fund, which has developed non-invasive harvesting technique for bottom-dwelling seafood.
“In their test phase last year, Ava Ocean was able to harvest 500 tonnes of Arctic Scallop. This was at the start of their commercialisation and they were already profitable. The company will now look to scale its operations to new geographies and new species, with huge potential to improve the sustainability of fisheries while responding to the pressures on food security,” she adds.
