“Sustainability is in the Finnish DNA”: Elias Korosis, Partner at Hermes GPE, believes in Finland’s global leadership in sustainability and innovation
Elias Korosis, the Partner at Hermes GPE and the portfolio manager of the company’s Environmental Innovation Fund, was amongst the speakers at FCVA’s Spring Seminar on April 4th. We got a chance to chat with Korosis about his work with innovation-led growth investing before he took the stage to further share his thoughts on sustainability in the technology era.
How does Korosis know if the company is making actual impact?
While an unblemished ESG score – a term used in private equity to ensure that the company has gone through due diligence – is a good starting point, being impactful is about actively making a difference.
“It’s a blurry space”, Korosis says. “Of course many companies passing ESG with clear numbers are creating impact as well, but I think of impact as making a more radical and substantive change”, he continues. Korosis offers a helpful analogy: the history of hand hygiene. Handwashing had a huge societal impact when it was first introduced, as it greatly improved healthcare levels. Today, it is merely an established practice, not something actively creating impact.
Korosis brings up an example of an impactful company from the Hermes GPE portfolio: ELeather, a UK-based company engineering eco-friendly materials based on leather waste. Their fiber materials are widely used in aircraft seating industry. By being one of the first to disrupt an industry as ancient as the leather industry, the company is bringing something completely new to the game.
“Impact is about solving big problems, and the innovation is the way to solve them. When people think of impact investing, they may not think about companies such as Uber and Lyft”, Korosis points out. “But they (Uber and Lyft) are bringing large-scale changes on consumption, and that is what I mean by impact. It goes back to innovation. They are disrupting a massive sector to the point that people rethink industrial strategies based on the ride-sharing model. If you want to see real change, your investment activity should lean towards innovation”, he concludes.
Is Korosis worried about the potential conflict between sustainability and profitability of his investments?
“Sustainability is a real, urgent issue”, he states. “And more there is urgency around it, more capital will go towards it.”
It is becoming risky to be unsustainable, as the number of viable alternatives for consumption models is rapidly increasing. People are quick to realize which production and consumption models are the most sustainable, and the companies winning in that transition are likely to be the most profitable. If a company is open for remaining unsustainable, they are at risk of losing consumers who prefer sustainable models.
“For long, governments could hide behind the fact that they need things like fossil fuel economy in order to keep jobs. Fossil fuels were a sacred cow you couldn’t touch, as they were necessary for the progress”, Korosis explains. “There is only one way to go. The trend is such that it becomes risky to not to look at the future.”
Biggest challenges often offer the biggest opportunities. Korosis encourages us to look at the change happening in traditional, large-scale industries still heavily dependent on 20th-century technology. Even if it takes years to take things up to a sustainable scale within these industries, the opportunities are huge. The change might not be fast, but it’s happening.
What does future hold for impact investing and Korosis’ investments?
“I’d like to see my investments do so well that they generate a platform and enough interest for these exercises to grow in the future. When you invest in the fund, you think of the future: the next fund and the fund after that. I would want our current investments to provide the evidence of success to then grow larger funds that address this theme, and other themes, such as healthcare and aging population, so we can be more substantive backers of innovation in the future.”
At the stage, Korosis called for direct climate action. When it comes to the global temperature increase, Earth is already grimly feverish. We already have a burning planet – and the burning platform. It’s time to take action, and it’s time for Finland to take the lead.
Korosis firmly believes that Finland is capable of providing global leadership for this massive challenge through its level of environmental innovation. Finland already demonstrates leadership in sustainability and ESG in practice, as social innovation is a principle firmly adopted at the societal level.
“There is no reason why Nordics couldn’t build a brand like Italy in design and France in luxury. Sustainability could be Finland’s global brand”, Korosis suggested, adding that sustainability is “in the Finnish DNA”. Sustainability is a large macro theme of the next decade, as it is both an urgent need and a multi-million opportunity of the century. The future of investing lies in innovation-led sustainability, and there’s a tremendous opportunity in the later-stage scaleup stage to be seized.
So, what can us Finns do?
European investors like Korosis himself would like to see Finland becoming an increasingly fertile investment ground so that it becomes easier to bring more global capital into the Finnish investing landscape. When thinking of Europe, investors already think of energy, environment, biotech and healthcare innovation. It is an attractive story for the global investor landscape, and it is up to Finland whether it wants to actively pursue its natural leadership.
Thank you, Elias Korosis!