2020: The Year of Sustainability
Kinnevik’s CEO comments on the development of sustainability in 2020
Georgi Ganev, CEO of Kinnevik wrote an article on Medium.com in connection to the release of our Sustainability Report for 2020. The article is available here in full.
"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.
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."
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.
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.
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.