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The Nordic countries are among the most stable, happy and technologically-advanced counties in the world. Their businesses, especially the ones that derive the majority of their business from within the Nordic region, reflect the values, priorities and culture of the society they serve.

Finland offers a business environment with uniquely high levels of stability, continuity and predictability. The pillars of Finland's peaceful and well-functioning society include transparent government and effective state institutions, an independent judicial system and respect for the rule of law.”

So proclaims the homepage of Business Finland’s website.

Although this self-assessment by the public organisation functioning under the Finnish Ministry of Employment and the Economy might seem highly self-assured at first reading, it does dovetail with the outside world’s perception of the Nordic countries as being among the most stable, corruption-free and business-friendly countries in the world.

Janne Kujala, Portfolio Manager of Evli Finnish Small Cap and Evli Swedish Small Cap funds, says that this perception (and Business Finland’s assertion) is well-grounded in reality. “It’s about the culture,” he says. “There are a lot of things that are common to the Nordics and high-up on that list is probably the overall trust in society. Generally, people do what they say. In the corporate world, if management says something, then you can at least approach it as something that they themselves believe in.

This cultural milieu is especially relevant when it comes to small and mid-cap companies from the Nordics.

Products of their environment

Small and mid-cap companies tend to do well in the Nordics. The Swedish Small Cap market, for example, measured by the Carnegie Small Cap Index, is larger to market cap than the main stock market indices in Brussels, Oslo and Vienna.

Investors and businesses, especially small and mid-cap companies, tend to invest heavily in their local markets.

Smaller and mid-cap companies in Finland derive a large part of their revenues from within the country. So, they are very interested in what’s happening in their domestic market and how the government and the surrounding society functions. Although small and mid-cap Swedish companies are more global, Sweden and the rest of the Nordic are still a big part of their sales in a lot of cases. So, they too are highly responsive to society’s concerns,” says Ville Tiainen, Nordic Equity Analyst.

Both Janne and Ville have an intimate knowledge of the Nordic Small Cap fund markets. The funds that they manage for Evli are based on a unique inhouse-researched-and-developed strategy and they regularly outperform their peers. Their Swedish Small Cap Fund has returned more than 23% per annum over the last decade and their Finnish Small Cap fund almost 20% over the same period and is constantly awarded 5 stars by Morningstar.

The Nordic countries have a long history of promoting sustainability and other ESG issues nationally and internationally. Norway is ranked as the most sustainable country in the world and the other Nordic countries are not far behind.

Consequently, Nordic companies rank highly on every major ESG chart. The Morningstar Sustainability Atlas ranks Finnish and Swedish companies among the top five and institutional investors in the Nordics, as a matter of course, recognise ESG factors as key components in investing. Evli also has deeply integrated ESG and sustainability factors in their investment process and both their Swedish and Finnish small-cap funds have high sustainability scores and very low carbon footprints.

Corporate governance that empowers stakeholders

Nordic countries perform very well in global corporate governance rankings and indices too. The multitiered corporate governance structure prevalent in the Nordics allows for more business transparency and the greater participation of stakeholders in decision-making. Listed Nordic companies, for example, have a two-tier structure that aims to separate the executive function of the board from its monitoring function.

Unlike with companies in some of the other developed markets, where you often have the CEO in a dual role as the chairman of the board, the model that we have here makes sense to me. The shareholders, the owners of the company, get to choose who goes on the board of directors. The board them hires or fires the CEO,” says Tiainen.

A renaissance in start-up investing

The Nordics are investing heavily in digitalisation and compare especially well against their peers from continental Europe. This has created an ecosystem where technology and technology-dependent start-ups thrive.

In 2010, Finnish start-ups raised EUR 110 million, with EUR 19 million of it coming from international investors. Just ten years later, in 2020, the total amount raised was EUR 951 million, of which EUR 271 million came from international investors,” says Tiainen.

In 2018, the Global Start-up Ecosystem report ranked Helsinki, the capital and largest city in Finland, as the most locally connected city in the world and today the city hosts more than 500 start-ups. The government is playing its part as well. Business Finland introduced a start-up visa in 2018 to attract international talent and innovative start-ups to Finland and Tekes, the Finnish Funding Agency for Technology and Innovation, provides low-interest loans and grants to challenging and innovative projects. The organization also offers funding for research and development work carried out by companies, research organizations, and public sector service providers in Finland.

Ville notes that these start-ups can scale-up quickly and become listed companies, offering investors access to exciting new opportunities among technological innovators and leaders. “We are witnessing a renaissance in start-up investing,” he says.

Thriving in, and sustaining, Nordic values

This start-up ecosystem is self-reinforcing – people in start-ups go on to other companies or start their own business and hire people who then becomes experts in something. They in turn go on to start their own companies as well. We have started seeing venture capital-backed companies that are being listed in Helsinki, which hasn't happened a lot in the past years. I’m pretty optimistic about the future,” says Janne.

The Business Finland website seems to have got it right, after all. The Nordic companies, of today and tomorrow, thrive in, and in turn, sustain, the quintessentially Nordic values, priorities and culture of the society they serve.

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