Investing for Good is Investing for Resilience — Caroline Farberger on Sustainable Investing and Building Better Business

25 years of experience in the financial industry is one reason to take Caroline Farberger’s advice when it comes to investment.

Add to that her hand in the development of ICA Insurance from 0 – SEK 800 million in 6 years as CEO, while simultaneously taking an enormous personal and professional risk by coming out as transgendered during her tenure, and we have a wealth of reasons to pay attention to the trail-blazing and successful business leader and corporate icon. 

Caroline, who will be opening our conference this year as keynote speaker, has been involved in business development and management at all levels, and most recently has been using her skills to build better, more resilient, and more valuable organisations as partner and chairwoman at Wellstreet, the pioneering early-stage investor based in Sweden. 

The “Why” of Building Sustainable Businesses

ESG (Environmental, Social, and Governance) goals are no longer optional luxuries for new companies. Having these objectives clearly defined and well-implemented is key to the longevity and growth of businesses today.

As Caroline asserts: …the importance of ESG is fundamental, and its effect is binary. Either we build businesses that contribute to our future, or we build businesses that won’t survive: customers won’t buy their products and services, talent will not join their ranks, they will lose their “license to operate” and capital will cease to flow their way. We have therefore passed the point where it was conceivable to make sense of ESG through a cost lens, where short-term profit needs to outweigh costs. ESG is, in fact, a prerequisite for a company to exist at all.”  

To add to this, it is important to understand that sustainability measures do not operate in silos: the environmental and social influence each other, and governance strategies are shaped by both.

Thus, Diversity, Equity and Inclusion are important components of the ESG agenda. 

Building ESGs into your company DNA right from the start

According to Caroline, new businesses simply cannot afford to not incorporate real and measurable ESGs into the way they are run, already from the early stage of development.

While many might consider having and adhering to ESGs is a ‘nice-to-have’, in today’s corporate climate, it has become a non-negotiable. To start, many investors are less likely to consider funding your enterprise if such goals are not put in place and business practices formed in order to meet them.

In addition, studies have shown that companies with clear and well-implemented ESGs perform well in their ability to attract customers, and also high-value talent, leading to sustained growth of the business. And this goes beyond clever use of trending buzzwords and surface-level practices to appear as though one is satisfying investor and customer demand.

If the motivations for incorporating good ESG practices into your businesses remain at surface level and can easily fall away should other pressures mount, then your business is vulnerable to the dangers that good ESGs build resilience against.

To reiterate what Caroline outlined: it goes beyond making profit, it is about building a strong foundation for sustained growth upon which companies and their investors can rely. 

Investors Need to Get Involved in the ESG Building Process

While start-ups should, as they create and build their operational models, develop sound and measurable ESG practices, this can be a terribly daunting and overwhelming task to take on.

As Caroline outlined in our interview, there is so much pressure facing new companies from the get-go – simply achieving their visions in continually changing and highly competitive environments requires their full attention, time and energy.

From the strain of managing day-to-day operations, production, marketing, sales, human resources, and of course securing and managing finances, it is easy to see why admirable objectives such as ESGs can be seen optional and be put on hold until the company is more stable.

Here, Caroline stresses, is where really responsible investors should be getting involved. To acquire more companies with good ESG practices, they need to help those companies develop those practices.

As case in point, Caroline herself gets involved with training initiatives by Wellstreet, for their portfolio companies, in which they demystify and simplify the ESG agenda, cultivate sustainable thinking into company culture, and show them how they can incorporate ESGs into their businesses.

With investors getting involved, and ensuring that CEOs and founders of new companies are in attendance, building sustainable business becomes normal, and everybody wins. 

A Global Phenomenon

Wherever your new company is located, ESG strategies are vital. While legislation may vary across the globe, the pressure to conform to sustainable goals has become an international phenomenon.

Businesses located in Europe are, for example, subject to SFDR (Sustainable Finance Disclosure Regulation). Businesses located outside of this region, should they wish to operate in Europe, or do business with European companies must adhere to European regulations.

Similarly, other regions have implemented ESG regulations into their operational guidelines for businesses. And, even where regulations are not enforced, public pressure around the world is mounting: we need our businesses to behave more responsibly, ethically and sustainably

Caroline’s Advice to Start-Ups

Caroline is eager to help new businesses thrive, and build sound ESG strategies. She has, therefore, offered some tips, from her position as a VC Investor: 

  • Build in ESG right from the start as part of both the business model and all of the company’s processes. From setting up your supply chain to the distribution and pricing of your products and services, all aspects of your business are affected. Further examples include: terms and conditions with customers, compliance monitoring and how employment conditions you offer promote equality and diversity. ESG runs deep and effort needs to be put in very early on. 
  • Actively look for investors who, in both word and deed, work with ESG investment principles. 
  •  Set requirements for practical help you expect from them with regards to training and implementation of ESG in your company. 
  • Build early trust with your stakeholders by sharing your ESG work in your internal and external communications and start collecting data on ESG even if this is at small scale in the beginning. 

A Shared Endeavour

Along with her advice to start-ups, Caroline has made it clear that investors need to play their role in building more sustainable businesses of the future.

She states herself, that “with capital comes responsibility”, and that as we only have this singular world to live in, its vital that we do our best to preserve it through sustainable practices.

The stark state of the climate, global conflict, among other stressors have made it evident that shaping a world that lasts and is safe for all is going to need a shared effort by all, and that those who do have the resources to create a positive impact, such as investors, should do so now.

This willingness to do the work right on the ground is evident in her and Wellstreet’s hands-on approach to investment and building resilient companies, and an optimistic vision for the future.  

Wherever you are reading this from today, Caroline’s advice is valuable. As start-ups, your investors will be expecting you to incorporate ESG strategies into your business, and your investors may too be under pressures from their regulatory bodies to do so. Or, you may observe that your social or physical environment will benefit from business practices that do less harm, are more equitable, are more resilient against unexpected crises.

Wherever you are building your business or investing from, do it well, with long-term vision, and share the responsibility of doing so. 

Thank you, Caroline, for the valuable insights and clarity on this topic. For the opportunity to see her deliver further advice and inspiration in-person, get your tickets to SHE 2023 now! 


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