Net impact data providing insight for investment decisions at FSN Capital Partners

Starting point: Seeking new ways of evaluating investments to introduce impact thinking

FSN Capital Partners, the leading Northern European private equity firm and advisor, is a known pioneer in investing responsibly, exemplified e.g. by being among the first PEs to publish a sustainability report and to become a UN PRI signatory. In 2022, when commencing the development of a new capital fund called Compass Fund, they sought new ways to evaluate investments from a responsibility standpoint.

The new Compass Fund, classified as an Article 8+ fund, was set to focus on investing in four themes: green transition, health and well-being, the knowledge economy, and ESG leaders across sectors. While it was not designated as an impact fund, FSN Capital believed that its investment targets would contribute to positive global directions.

Pål Dale, Senior Director at FSN Capital, and his team received a recommendation to explore The Upright Project methodology and data platform to integrate impact thinking into investment decisions.

“Upright's approach to net impact was comprehensive and impressive, and we realized that Upright could provide us with a solid starting point for discussing impact within our organization,” he explains.

Solution: Integrating net impact data to case preparation for enriched analysis

FSN Capital integrated target company net impact profiles by Upright into their investment decision process. Since then, the deal teams have been utilizing net impact data as a component of their investment case preparation work, providing insight for FSN Capital’s investment committee. Impact data serves as one data point or lens, enriching and expanding the analysis of the companies under consideration for investment.

In practice, the process unfolds with the deal teams receiving the company profile for each case, focusing on net impact but also including complementary metrics like UN SDG revenue alignment, SFDR PAI indicators, and EU taxonomy data. Deal teams then review the net impact assessment with an Upright expert and present it, along with other materials, as part of deal documentation to the investment committee.

“The onboarding process to Upright data was lean and straightforward, and the cooperation has been smooth ever since. The Upright team has been able to react in fast and agile ways to new data requests,” Dale shares.

Dale’s role involves working closely with FSN Capital’s portfolio companies. For instance, when conducting strategy work with these companies, using net impact has proven to be useful in facilitating discussions on business focus areas for the future.

Benefits: Insights and competence for integrating impact into investment strategy

Integrated in the investment process, net impact data has provided FSN Capital with a new perspective for reviewing companies. For example: if a company’s impact score is significantly negative, that would be a red flag; conversely, strongly positive cases increase internal excitement towards the deal.

The most significant value-add has been the internal discussions and learnings from net impact results. Since our people had not been trained to think in terms of net impact, this has been a great way to enhance organizational learning and understanding in a holistic way to assess the impact of companies.

Pål DaleSenior Director, FSN Capital

Dale shares that the investment committee has perceived quantitative net impact data well, as it has made discussions about impact sharper and more straightforward.

Incorporating net impact has also opened possibilities for the future.

“If we want to make the next Compass Fund an impact fund in a few years, the work with Upright has helped us to build the competence internally to do so,” says Dale.