January 10, 2022
Expertise and enthusiasm – Pertti Nurmio has brought external perspective to Finnfund’s investment committee
“I have found the diversity and complexity of Finnfund’s business professionally very rewarding,” says Pertti Nurmio, the first external member of Finnfund’s investment committee.
As Finnfund’s Investment Committee is the final stop before the proposals enter the Board of Directors, which then approves – or rejects – the investment proposals, it has a critical role within Finnfund in carrying out its investment strategy and policies through the investment process. The committee consists of senior management members with backgrounds, for instance, in finance, sustainability, impact, communications, and law.
Having external members in the committee, Finnfund aims to gain knowledge and have more expertise and perspectives on the table when assessing the investment proposals.
After serving Finnfund’s investment committee for five years, Pertti Nurmio is now leaving the position. He will continue as a board member in one of Finnfund’s investee banks and carry out selected consultancy assignments. Thus, he will have close ties with Finnfund also in the future.
It is time to look back. How has it been to work as an external member assessing the investment proposals – and how has the work changed over time?
Focus on commercial terms
Nurmio has a solid background in the banking and private equity industry for almost four decades. Most recently he served as the main owner and managing partner of one of the leading Nordic private credit firms with three private credit funds under management. His previous banking career also includes a seven-year assignment in Singapore and New York.
According to him, all this has given valuable experience to assess Finnfund’s investment proposals.
“I hope I have been able to illustrate commercial investment perspectives, kind of second opinion on the proposals. This includes considerations, for instance, on commercial terms, capital structures, sponsor issues, corporate governance, due diligence matters, exit considerations. Since Finnfund may invest in various commercial funds that, for instance, are targeting African small and medium-sized enterprises, SMEs, I believe I have been able to provide helpful guidance also in fund-related issues,” Nurmio says.
“Diverse and complex investments”
“Since Finnfund often operates in LDCs, the least developed countries, and Africa being the dominant region, the investment environment is mostly extremely challenging. Political and economic risks are extensive and governments’ financial resources very limited to support, for instance, important infrastructure projects. Therefore, investment structures may be complex. Besides Finnfund uses all the possible instruments from senior secured loans to equity,” Nurmio says.
Nurmio reminds, that the diversity and complexity are not only limited to financial structures and instruments, but the range of different sectors is wide, too: Finnfund covers a wide spectrum of industries where impact matters, for instance, sustainable energy, microfinance, telecommunication, forestry, agriculture, and health – without forgetting disruptive technologies that may bring huge impacts over time.
In addition, the stages where Finnfund may consider entering can include e.g., greenfield, brownfield, growth financing, corporate funding, and fund participations. According to Nurmio, the teams need to specialise.
“I have found the diversity extremely interesting,” Nurmio stresses.
Before joining Finnfund’s investment committee, the world of impact investing and development finance was rather new to Nurmio.
“I feel privileged having been able to bring my contribution in the important role that Finnfund has. It has been refreshing to consider matters beyond commercial issues.”
Positive development in sustainability
During the last five years, Finnfund as well as the work of the committee has changed. As the number of investments has increased, it has also meant more work for the committee. Finnfund’s strong emphasis to develop environmental and social sustainability, as well as impact measurement, has also brought new aspects to the table.
“Finnfund is a very professional organization having policy frameworks in sustainability, such as human rights, gender equalization, and tax issues. Finnfund has also developed extensive credit policies and guidelines. All these have evolved positively over the last years,” Nurmio says.
People feel that the work they do matters and can contribute to the living conditions in developing countries,” he adds.
Assessing close to 200 investment proposals
Finnfund has three criteria for its investments: profitability, impact, and sustainability. The balance between these three criteria may vary depending on the investment, hence all proposals must be discussed and assessed case by case.
“One of my tasks has been to pay attention to the expected returns of a transaction vis-a-vis the risk. Coming from the field of commercial, private investing you are used to emphasise risk and return equilibrium,” he notes.
There is one obvious question we must ask. Is there any specific investment that you have found particularly interesting? He laughs.
“There are close to 200 investment proposals that have passed through the committee over the years and so it is almost impossible to highlight the most memorable ones. I have appreciated how devoted the teams are willing to conduct due diligence visits in places that can even be seen as dangerous to one’s health, for instance, in the midst of pandemics or entering places where political conflicts exist.”
However, Nurmio reminds, that everything is not always as risky. Every investment must be assessed individually.
“Of the various sectors, I have found microfinance, renewable energy, disruptive technologies, and fund investments the most interesting.”
Cooperation and hands-on approach
The COVID-19 pandemic has had negative impacts on the investment environment, and it is difficult to see the short-term and particularly long-term consequences the pandemic may have on companies and sectors. Simultaneously, due diligence and monitoring visits have become challenging due to travel restrictions.
Nurmio believes that the development financiers have an important role particularly in countries where commercial money is not available due to political or economic risks. According to Nurmio, this is ever more important, as the world is getting so complex.
“Finnfund is viewed as a trustworthy partner with an extensive network and often its risk-taking capacity and willingness exceed those of its peers. Development financiers seem to have strong co-operation even though there are differences in their strategies. Finnfund has been able to source transactions due to its “hands-on” approach and with co-operation with the other financiers when needed. Finnfund has a good brand and reputation.”
After leaving the investment committee, Nurmio will split his time between board memberships and consulting assignments. He is for instance in the board of the asset management firm Korkia and working as an advisor to Certior Capital, a private credit firm. Tennis, golf, and a country house in Sipoo, with a very convenient distance from Helsinki, will also have their share.
We wish to thank Pertti for all his expertise, enthusiasm, enlightened questions, as well as excellent debates during his time in Finnfund’s investment committee.