Reynir Indahl, Founder and Managing Partner of Summa Equity, discusses how the firm has evolved and what role private equity can play in saving the world.

What has been Summa’s standout deal or biggest accomplishment this year?

We completed a partial exit of EcoOnline earlier this year, and that investment has been a great achievement for us. The company, a SaaS solution for chemical management and occupational safety, contributes to good health and wellbeing, by facilitating a safer workplace through proper handling of chemicals. Since our initial investment in 2017, we’ve used our ESG-focused approach to enhance growth and value, including via several add-on acquisitions, enabling EcoOnline to expand its footprint and product offering.

Another milestone deal for us this year was Sengenics, a proteomics company based in Singapore. Sengenics represents our second international transaction and the beginning of a more global investment focus for Summa.

Looking back on Summa’s whole journey so far, our proudest achievement has been the progress we’ve made in committing to ESG, proving to the financial industry that you can “save the world” while creating value at the same time. When we started in 2016, we were one of the first firms to commit to the UN Sustainable Development Goals – the SDGs. Now, I’m both pleased and surprised with how fast the private equity world has followed in our footsteps. 

Most large investors now recognise the need to factor ESG into their investment approach and that change has happened very quickly. When we raised our first fund in 2016, there was still a sentiment in the investment community that if you focus too much on ESG it would be negative to returns. As a result, we faced a lot of questions around our investment approach and we had to really explain how we were going to integrate ESG and why we believed it was going to create higher returns with lower risk. Today, investors aren’t so hesitant. 

How has the outbreak of the pandemic impacted ESG investing? Are there any new areas that Summa is looking at for investment?

The pandemic has undoubtedly accelerated the focus on ESG. In particular, areas like healthcare, sustainability and climate change have received increasing attention from investors as people come to realise that events, such as the pandemic, are not unrelated to these challenges; human civilisation is pushing the boundaries of this planet and that has consequences. 

Summa’s investment strategy has remained the same, we’re still focused around our three themes: resource efficiency, which is aligned with the “Environment” in ESG; changing demographics or “Social”, where you find our healthcare and education investments; and our third theme is tech-enabled businesses, which are often driven around regulation and compliance within "Governance". Our portfolio has performed very well this year, which gives us further evidence that future-proofed companies can withstand volatile times.

How can private equity help find solutions to world crises?

Our approach to proactive dealsourcing is to start by asking: Where do we have expertise? And then: What challenges within those areas need to be solved? To give a specific example, Norway is the largest country for salmon farming and we know that life under water is at risk (SDG14). Therefore, it makes sense for us to look for investments that improve life under water related to aquaculture.  Looking more generally, private equity firms must ask themselves: What will the world look like in ten years? And given the outlook, what areas should we invest in?

With the industry’s experience and know-how, firms can help to solve some of the biggest challenges we as a planet face, by driving much more proactive deal sourcing within those areas, and by acquiring and developing companies that are well positioned to make a difference. 

What lies ahead for PE firms in terms of ESG and impact investing?

What’s most important right now is that we find a common way of reporting on ESG. There’s a lot of development happening, such as the EU Taxonomy, which means reporting will become more transparent and this will help avoid greenwashing. Some of the Scandavandian firms are already moving in this direction; EQT, for example, has done some really great work in this regard. With the pace of change we are seeing now, I predict that in around five years, we will see all investments have an ESGfocus, as it becomes increasingly important in attracting capital from LPs, attracting and retaining the best employees and becoming the preferred owner of companies. 

What are Summa’s goals and ambitions for the future?

Until now we have been solely focused on buyout investments in the Nordic mid-market. However, as we’ve gained more experience in different industries, we’re increasingly identifying new, smaller companies with innovative solutions to global challenges, and the opportunity to help scale these up to become suppliers or customers to some of our other portfolio companies. As a result, we plan to expand our investment focus, both in stage and geography, to be able to invest in these types of businesses - and that will include companies outside of the Nordics.