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– Innovations are crucial to achieving the EU’s climate goals, and companies are successful in their niches. However, their sustainability focus and long-term goals do not fit into banks’ traditional evaluation models and criteria for financing. <\/p>\n\n
Misunderstood by banks<\/h2>\n\n
The companies in the study are capital-intensive and need external financing to scale up their operations. Initially, they use the founders’ own capital or support from private networks, but when they seek larger loans to expand, they run into problems – which do not seem to be primarily about lack of creditworthiness or cash flows. <\/p>\n\n
– Banks used to assessing traditional companies find it difficult to understand and value others that want to change the industry in a fundamental way. They deviate too much from the expectations of how a company should look and function, says Linda H\u00e4llerstrand. <\/p>\n\n
– They tend to reward traditional companies, which can make it difficult for pioneering and new impact companies to realize their potential.<\/p>\n\n
Need for new evaluation models<\/h2>\n\n
The research points to the need for a paradigm shift in the financial sector. Linda H\u00e4llerstrand argues that banks may need to introduce new criteria in their evaluation models that better reflect the long-term value of sustainable companies. In her thesis, she proposes additional criteria for evaluating sustainability objectives and related innovation instead of focusing solely on traditional and historical financial data. <\/p>\n\n
– Society expects a sustainable transition in industry, including the financial sector, so that we do not risk missing crucial opportunities for sustainable innovation.<\/p>\n\n
Political and financial change needed<\/h2>\n\n
While impact companies are experiencing a lack of access to bank finance, and see it as a brake on sustainable development, Linda H\u00e4llerstrand sees a growing role for impact investors and industrial financiers.<\/p>\n\n
– They invest in sustainable businesses both for strategic gains and to learn from their innovations.<\/p>\n\n
But such investments represent a small share of the overall capital market. So more action is needed to ensure an inclusive and rapid green transition, she said. <\/p>\n\n
– We need both policy incentives and more education in the banking sector to change the perception of sustainable innovation.<\/p>\n\n
Linda H\u00e4llerstrand also believes that managed public financing programs could help companies that face obstacles in commercial capital markets.<\/p>\n\n
– With the right support, impact companies can not only survive, but also lead the way towards a more sustainable future. Access to external finance is crucial, and points to the importance of including impact companies in financial markets, said Linda H\u00e4llerstrand. <\/p>\n\n