Mid-year outlook: Backlash in the US will ‘underscore importance’ of true impact, says Trill’s Irell

Pia Irell, partner and impact & ESG analysis lead at Trill Impact, reflects on 2023 so far and looks ahead to H2:

Has the political backlash against ESG affected your business? How do you feel about it?

The backlash against ESG is predominantly observed in the US and has not affected Trill Impact’s business. The reason lies in the widespread acknowledgment of ESG considerations as vital factors in assessing risks and opportunities during the investment process. For example, a recent study conducted by KPMG reveals that over half of M&A dealmakers have cancelled deals based on ESG due diligence findings. This illustrates the growing influence of ESG parameters in investment decisions. Another study by Nordea in 20212 affirms that stronger ESG performers often excel in both value creation and resilience during periods of market volatility.

While it is true that there has been some US political backlash against ESG, the interest and ambition level among investors and business owners remain high. The EU’s regulatory landscape is also seen as a crucial driver toward greater transparency and responsible capital allocation.

We view the current backlash as a potential catalyst for constructive dialogue, hopefully leading to the differentiation between genuine value-creating ESG efforts and those merely categorised as “impact washing” and non-value-add. Rather than hinder our mission, this situation underscores the importance of a true impact mission and reinforces our commitment to fostering positive change for both people and the planet.

The impact investing market is scaling up and going mainstream; how is this affecting your business?

The mainstreaming of impact investing has proven favourable for Trill Impact, validating our core mission, and aligning with our distinct focus on impactful sectors. This trend has not only expanded our reach but also enabled us to leverage our proprietary impact model to make meaningful investments. Founded in early 2019, Trill Impact has rapidly grown in response to the strong demand for our offerings. This positive development has transformed the firm into an Impact house, now encompassing three impact strategies, six offices, and a team of more than 50 members.

Which impact themes, sectors or strategies do you see as being most exciting and untapped?

At Trill Impact, we align our strategies with three overarching impact themes: A sustainable planet, healthy people and a resilient society. Within these broad areas, we have identified several exciting and untapped sectors that hold immense potential for meaningful impact, driven by global megatrends. These trends serve as catalysts for demand, capital allocation and initiatives that are geared towards addressing pressing challenges, all in line with the ambitions of the 17 Sustainable Development Goals (SDGs).

Resource Efficiency & Circularity: The need for more efficient use of resources and embracing circular economy principles represents a tremendous opportunity in Northern Europe, where progress towards this SDG has lagged.

Clean and Efficient Energy: Innovations in energy efficiency and renewable sources offer exciting avenues for growth, with the dual benefit of reducing environmental impact and fostering energy independence.

Sustainable Food and Eco Systems: Developing sustainable agriculture practices and ensuring a healthy ecosystem can create transformative changes in food security and environmental preservation.

Health and Wellbeing: Focused investments in healthcare and wellbeing can enhance the quality of life, particularly in under-served communities.

Education, Inclusion and Equality: Addressing disparities in education and promoting inclusivity and equality can lay the foundation for a more cohesive and resilient society.

Resilient and Sustainable Communities: Building community resilience through sustainable infrastructure and governance will create lasting social impact.

Good Governance and Security: Investing in transparent, accountable governance structures and security measures, as cyber security, can strengthen societal structures and promote stability.

By aligning our strategy with these core areas, we are placing ourselves at the forefront of solving vital European, as well as global challenges, adhering to a responsible investment philosophy that resonates with our broader mission.

Which impact themes, sectors or strategies do you plan to avoid because they are over-funded?

Trill Impact emphasises investment in sectors where capital is most needed to achieve the 2030 Agenda for Sustainable Development. The current level of investments needs to be improved, with an annual gap of more than $4 trillion. Our impact model guides us towards areas with the most potential for positive change, avoiding over-funded sectors where our capital would add only marginal value. While we focus on underserved themes such as resource efficiency and sustainable communities, we actively steer clear of well-funded areas where the SDG targets are reasonably met already in our targeted markets.

Do you use benchmarks to evaluate your impact and why (or why not)?

Trill Impact uses benchmarks to evaluate our impact, understanding that transparency and reliability are key. We benchmark between our own investees and with peers, but we recognise that common standards are still needed for truly effective comparison, the industry is not fully there yet. At Trill Impact, we’ve developed a proprietary model based on our experience and international frameworks. This model allows us to rate the impact at the time of investment, and project future potential, define relevant KPIs and continuously measure efficiency and success. Our approach is aligned with our mission to maximise positive impact and returns.

How will the development of generative AI affect your business? Are you using or planning to use it?

Trill Impact is excited about the potential of generative AI in supporting decision-making, risk assessment and innovation. We’re actively embracing this cutting-edge technology within our firm and portfolio companies, recognising it as a game-changer that can greatly enhance efficiency and effectiveness.

While we’re thrilled about the possibilities, we’re also conscious of the need to handle AI with care. We know it can reflect human biases and lean on historical data, but we’re committed to managing those challenges. We approach the use of AI not just as a tool but as an opportunity to innovate responsibly. In embracing generative AI, Trill Impact is not only staying ahead of the technological curve, but also ensuring that our application of this exciting technology aligns with our commitment to positive impact and responsible growth.