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On the 20 and 21 November, Helsinki welcomed the annual footfall of 13,000 top international investors, startups and tech leaders for Slush 2024. The theme for this year’s event was Metamorphosis, which speaks to radical change, growth and transformation – something which many founders and investors alike actively seek to create.
The first step in creating change is benchmarking and accurately measuring the current standing of things. As such, at this year’s event, EIT Urban Mobility asked the question: How to measure the real impact of startups?
In a session held at the EIT booth and moderated by Johannes Kirschner, Investment and Portfolio Manager at EIT Urban Mobility, Fredrik Hånell, Director of Impact Ventures at EIT Urban Mobility was joined by Tuukka Yrttimaa, Head of Investor Business at The Upright Project to discuss how best to collectively approach measuring impact and its nuances.
Defining and measuring nuanced impact
“Impact is what you create versus the “as-is” says Fredrik.
To measure ‘as-is’, The Upright Project created a robust macro model with a taxonomy of over 150,000 products and services to which new solutions are added when they are developed. This model speaks to “… the core business and facts” as stated by Tuukka and is not to be confused by measuring ESG, which is often used as a box ticking exercise for companies. With this model we get to lift the veil on real impacts. Simply put by Fredrik: “Philip Morris for example, can have a really high ESG by ticking all the boxes. However, it has a really low impact due to the negative effects on health.”
To dig deeper however, often gives rise to nuance, Fredrik continued “Solutions with a high impact are for example nudging solutions. Changing behavioral patterns give a high impact. Software, however, gives a low impact.” Without the materials and footprint of the phone in this case, we would not have the nudging solution promoting alternative and sustainable modes of transport for example.
Similar investigations into ride sharing platforms and increased car lanes raise similar questions: “This seems to give less CO2 due to less cars. However, people will start to use it more often. You recall the classic example of adding additional car lanes? More cars will come, and driving will not become easier.” It is of the utmost importance to investigate such cases, as when digging past the potential impacts which startups tend to pitch, he adds “the real impact might be only 0.1%” These examples speak to the nuances impact investors face and the importance of using the right tools to have a measured understanding.
The workings of partnership and investment decisions
As both EIT Urban Mobility and The Upright Project have the common understanding of measuring impact at the core business function, this formed the base of ongoing partnership. EIT Urban Mobility “needed a completely unbiased view of our investments and to compare us with funds” explains Fredrik, a service which The Upright Project objectively provides, while Tuukka added that users “…can aggregate solutions to companies, aggregate companies in funds and then you are able to compare the impact of different funds.”
In being able to refer to and use these insights Tuukka remarked that “… when investors will select impact solutions it has a large effect on the market.” From the perspective of EIT Urban Mobility, using this measure has meant being able to create significant positive impact. The impact score of EIT Urban Mobilty’s investment portfolio is 46%, compared to the benchmark of 37%. Companies such as Bruntor, Fyma and Waybler are example of companies which exceed this average with impact scores of 50% and more.
Driving conversation and future of impact assessment
As well as understanding where and in whom investments should be made, Tuukka also wants to raise questions: “With our insights, you might choose different for your investments.” In this way The Upright Project contributes to knowledge and a conversation which shapes the future positively – “Upright is not black and white; it is to spark conversation. If we reach at least one investor to rethink an investment decision, we are already achieving.” The model will only improve as Tuukka envisages that “eventually we [The Upright Project] want all companies worldwide included, so you can benchmark and compare to all.”
To gain increased insight into EIT Urban Mobility’s approach to impact investing, an explanation into the importance of impact measurement and highlights from the portfolio the full report can be found here.
You can continue the conversation on 4 December from 15.00 – 16.00 CET, as EIT Urban Mobility and Upright Project will deep dive into impact investing during a one-hour webinar, together with European Women in VC.
