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More growth = more impact

Craig Bonthron explains why the fastest growing businesses often deliver the greatest positive impact – and why focusing on them can generate the most long-term value for investors.

Key takeaways

  • ‘Hyper growth’ enables positive-sum outcomes
  • As businesses mature, their ability to innovate and create transformational positive impact fades
  • By focusing on hyper-growth businesses we can deliver the most impact and maximise long-term returns

As we explained in our white paper Our approach to investing for a positive future (PDF, opens in a new window), our starting point is to look for areas where technological innovation intersects with the world’s biggest long-term challenges. This leads us to innovative companies that are having a transformational positive impact. 

It turns out that this also leads us to some of the world’s fastest-growing companies – businesses in the emerging and hyper-growth phases of their lifecycles. Conversely, companies that are having a negative impact tend to be in stagnation or outright decline.

Why should this be?

“New needs emerge as societies evolve. When such changes happen, new entrants, unencumbered by a long history in the industry, can often more easily perceive the potential for a new way of competing. Unlike incumbents, newcomers can be more flexible because they face no trade-offs with their existing activities.” Michael E. Porter

When it is managed well, growth creates a virtuous cycle 

If you have ever worked at a fast-growing company, you’ll know that it tends to be fun. Purpose-driven transformational products and new opportunities (both internal and external) incentivise positive-sum behaviours. Dynamic and powerful cultures are easily established in such environments.

Rapid innovation tends to be exhibited at the best growth companies because it leads to sustainably high rates of growth and is a key source of competitive advantage.

When do companies create real change? Positive impact is greatest where innovation and growth are most abundant

When do companies create real change

“Do unto others as they would do unto you. And make sure you do it first” Henry M Flagler, Standard Oil (apocryphal)

On the flipside: stagnation leads to negative-sum outcomes

If you have been unfortunate enough to work for a company that is declining, things tend to turn nasty, both strategically (as we discussed in our previous article on lobbying) and culturally. If you are fighting just to hold onto the same-sized piece of pie in a market that’s shrinking, it is a good sign your company is entering a death spiral. This creates a fear of restructuring which usually leads to a toxic culture of negative-sum behaviours and outcomes.

It may feel intuitively correct that rapidly growing companies are fun to work for and that those in decline are not. But what is wrong with the large number of companies that lie somewhere between: those that are growing – just not particularly quickly?

Well nothing really… except that in the context of impact investing, there is nothing really ‘good’ about them either.

As companies mature, their strategic mind-set shifts towards ‘defence’ 

“One of the dilemmas of management is that, by their very nature, processes are established so that employees perform recurrent tasks in a consistent way, time after time. To ensure consistency, they are meant not to change – or if they must change, to change through tightly controlled procedures.

This means that the very mechanisms through which organizations create value are intrinsically inimical to change. These typically inflexible processes are where many organizations’ most serious disabilities in coping with change reside.” 

Clayton Christensen, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail

Fighting for market share in established markets and operating at scale means that bureaucratic processes must be built to ensure consistency and optimise performance. From a management perspective, these things may seem necessary and even responsible. But as Clayton Christensen identified, this necessity also handicaps the organisation by slowing the pace of innovation and making it resistant to change. The effect on culture can be significant.

When the overall size of a market stops growing (when the overall pie is not getting bigger) incentives shift towards zero-sum behaviours.

Winning – both internally and externally – must always come at somebody else’s expense (a bigger slice of pie for you means a smaller slice for them). Under these conditions, a culture of collaboration and mutual benefit can quickly give way to one of competing fiefdoms and self-interest.

Why are we counter-positioned in emerging growth?

Why are we counter positioned in emerging growth

We call the mature stage of the business lifecycle ‘the era of incrementalism’

Once a market position has been established and needs to be protected, change is viewed as a strategic risk, rather than an opportunity. Companies at this stage get very efficient at killing off ideas that don’t immediately boost their profitability.

The outcome is not that they are necessarily negative-impact businesses – but that their ability to innovate and create transformational positive impact becomes severely compromised. 

Unless their product or service is already positive impact, it becomes increasingly unlikely that it ever will be: purpose, strategy, culture, product and incentives all converge towards incremental change.

“Growth drives everything in this world. Growth is why start-ups usually work on technology — because ideas for fast-growing companies are so rare that the best way to find new ones is to discover those recently made viable by change, and technology is the best source of rapid change.” Paul Graham

A company’s rate of growth is highly correlated with its transformational positive impact

We believe this is clearly observable in public equity markets. The majority of ‘active ESG’, ‘sustainable’ and ‘impact’ funds today do not invest in the declining (or negative-impact) companies. But they are often heavily invested in lower-growth, low-impact large caps. This can be seen by looking at the investment style, market capitalisation and revenue growth of their holdings.

Investment style v peers

Style diversification

Source: Morningstar as at 30 June 2021

Our portfolio is different…

We are positioned in purpose-driven, innovative, high-growth businesses that we believe will create transformational positive impact.

This is not because it is more exciting or contrarian – but because we believe focusing on high-growth businesses enables us to deliver the most impact while also creating the most long-term value for our clients. 

Investing for impact: analysis and opinion from our impact equities team

Investment in a fund concerns the acquisition of units/shares in the fund and not in the underlying assets of the fund.

Reference to specific shares or companies should not be taken as advice or a recommendation to invest in them.

For information on sustainability-related aspects of a fund, visit the relevant fund page on this website.

For information about Artemis’ fund structures and registration status, visit

Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.

Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.

Third parties (including FTSE and Morningstar) whose data may be included in this document do not accept any liability for errors or omissions. For information, visit

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