Norvestor: Leading the Charge in Sustainable Private Equity Transformation

22 Jul, 2024

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The Green Transition is unstoppable and unavoidable; this Nordic company embraces the challenges.

Private equity firms are crucial to future-proofing SMEs and developing sustainable business models for the worthy Green Transition movement.

Head of Sustainability: Fredrik Franke

Nordic firm Norvestor has proven the worth of its innovative business model, and is turning its full attention to the planet’s urgent needs. Confronted by climate change, biodiversity loss, pollution, and social inequalities, businesses worldwide are increasingly driven to adopt responsible practices.

Private equity firms have an impressive position of influence and play a pivotal role in steering SMEs to greener pastures. Norvestor stands out in this landscape by emphasising sustainability as well as profitability via its partnerships with portfolio companies.

Norvestor has earned an enviable reputation over the past three decades, becoming a trusted partner in the quest for sustainable growth. The firm typically invests in medium-sized companies that leverage digitalisation and technology to enhance efficiency and societal value. With a strategic focus on buy-and-build, digital leadership, and ESG integration, the firm helps companies to scale in the right way.

Financial performance bears out the success of this model. Norvestor Funds have made 93 platform buyouts and some 450 add-on acquisitions, achieving 61 successful exits — including 16 IPOs. The operating profits of portfolio companies have grown by an annual average of around 30 percent. Recent funds have shown strong internal rates of return. The most recent, Norvestor IX, closed at €1.5bn last October, reflecting robust investor confidence.

Sustainability in Action

Norvestor’s 2023 sustainability report highlights how the firm is driving positive environmental impacts.

It invested in Pinja, a digital transformation partner, in 2022. Pinja helps businesses to reduce energy use, minimize raw material demands and waste, and optimize transport options. These industry-specific solutions help clients meet reporting requirements and reduce their carbon footprints.

Bio-energy pioneer company Helen uses Pinja’s AI-powered solutions to meet the EU’s Renewable Energy Directive III standards. Another company, Fresh Servant, employs AI to enhance material and energy efficiency in food production. Pinja’s impact underscores the critical role of digitalisation in the field of sustainability.

Colmec, a tyre service provider for the transport industry, joined Norvestor’s portfolio in 2023. Facing up to environmental challenges with ingenuity, Colmec aims to have a leading position in the circular economy by 2027.
The company focuses on retreading tyres, significantly reducing the use of natural resources and cutting CO2 emissions. It sells new tyres and extends their life via retreading — and ultimately recycling end-of-life tyres.

Another Norvestor portfolio company, 4Service, boosts social sustainability by providing meaningful work for people with disabilities. Working via a Norwegian state-run programme, tasks are tailored to individual abilities, enhancing personal growth as well as operational efficiency. Twelve part-time employees have fostered a diverse and inclusive workplace. 4Service is integrating this initiative into broader service offerings.

These efforts substantiate the positive correlation between ESG efforts and financial performance. A PwC survey found that 70 percent of private equity firms place value-creation as a top driver of their ESG activities. Benefits include brand enhancement, risk mitigation, competitive differentiation, and client attraction. Bain & Company research, in partnership with EcoVadis, shows that robust ESG practices lead to improved revenue growth and EBITDA margins. Sustainability measures significantly enhance business outcomes, according to Bain.

Generalist Yet Impactful

Norvestor has proved that innovative generalist private equity can drive substantial positive impact — without the need to become a niche impact fund. Norvestor’s success under a regular fund mandate (Article 8) demonstrates that such gains can be achieved across a broad investment portfolio.

This does not preclude Norvestor from setting up impact funds in the future but highlights the firm’s ability to effectively harness ESG for the greater good. As Fredrik Franke, Norvestor’s head of sustainability, states, “As we prepare our portfolio companies for upcoming ESG regulations, our focus is on future-proofing business models for a low-carbon and equitable economy.”

“We support our portfolio companies in navigating ESG challenges and seizing opportunities. By doing so, we not only enhance their resilience but also create long-term value for stakeholders.”

The vital role sustainability leaders play in private equity is more evident than ever in 2024. Companies that embrace this path are better positioned to thrive in a rapidly evolving regulatory landscape and meet the growing demands of conscious consumers and investors. Norvestor’s strategic investments and partnerships prove that private companies can be at the forefront of the move to a greener future.

Norvestor’s success stories nicely illustrate how targeted investments and strategic guidance can transform companies. Private equity firms like Norvestor will continue to be pivotal in shaping an equitable business environment.

Norvestor’s commitment to sustainability — along with its innovative partnership model — serves as a blueprint for private equity as a driver of the green transition. By future-proofing SMEs and fostering sustainable business practices, Norvestor makes a significant contribution to the global sustainability agenda.