A group of Sweden’s most successful entrepreneurs have started raising the finance that will form Europe’s biggest every early-stage impact investment fund. Impact investment focuses on financing start-ups whose businesses address the world’s most pressing social challenges. Examples would include climate change, access to education, access to basic financial services, internet connectivity food waste and poverty.
Confirmed participants in the fund include the founders of the gaming companies Minecraft and Candy Crush, the online only bank Klarna and the family behind the Hennes & Mauritz (H&M) empire. The fund will total €100 million and has the stated aim of showing that impact investing can deliver returns comparable to those of any other investment. Historically, it has been tacitly accepted that impact investments will, on average, deliver more modest returns that standard investments.
Niklas Adalberth, co-founder of Klarna, the payments fintech that has achieved ‘unicorn’ status with a value of more than $1 billion, explained to the Financial Times:
“There’s a mantra among investors that you can’t do impact investing and get competitive returns. We really want to prove this wrong. If we can show that it’s possible to do impact with competitive returns, maybe we can inspire the big capital to follow.”
Mr Adalberth is the driving force behind the formation of the new fund. It will be housed by his Norrsken Foundation, which offers two office spaces providing facilities for social entrepreneurs. One of the buildings is located in Stockholm and the other in Kigali, the capital of Rwanda. He says his motivation for founding the Norrsken Foundation was tiring of the cycle of “the constant chasing of the next goal or achievement”
The Foundation already runs funds through which it invests in companies that aim to tackle problems defined by the UN’s sustainable development goals. $32 million has already been invested in start-ups including Karma, which tackles food waste by facilitating the sale of surplus produce from supermarkets and restaurants and Welcome, an app designed to help refugees integrate more smoothly in their new homes.
The full roster of the new fund’s backers is Mr Adalberth himself, Carl Manneh, co-founder of Minecraft-creator Mojang, Filip Tysander, founder of watch brand Daniel Wellington, Sebastian Knutsson, co-founder of Candy Crush Saga maker King Digital and Ramsbury, the family office of the Persson family, which founded and controls H&M. €61m was confirmed as raised last week and the full €100m is targeted to be in place by spring.
The fund’s general partner is Agata Freimane, a former Morgan Stanley banker. She believes it is at least Europe’s, and possibly the world’s, largest early-stage impact investment fund and that the global trend is in favour of impact investing:
“We feel there’s a strong momentum building around impact. When you look today, many of the top graduates from university are thinking about launching impact start-ups.”
Mr Adalberth hopes that the fund’s investments will demonstrate to large institutional investors the potential of impact investments in terms of bottom line returns and convince them to take a more open approach to potentially investing themselves:
“The larger institutions are very conservative. It’s hard to get past the switchboard if you talk about impact. A traditional pension fund is required to make a high return and is not able to take the risk. That is why we need to go first and show what is possible.”