The past year was a wake-up call for many about the future of the planet. The threat of further climate change inspired many investors to put their money where their mouth is and step-up their ESG investing. While investors are still figuring out how to best benchmark ESG for their firms, it is understood that ESG will form a large basis of venture firms’ strategies in coming years.
And so, here are a couple of ESG stories that readers flocked to in 2021, based on pageviews.
Peter Gajdoš, a long-time climate investor, joined Fifth Wall in September to co-lead the firm’s climate fund. For him, now is the time for people to invest in climate technology as it has matured so much and better pricing means more consumer demand. He added the recent positive tailwinds coming from government support for climate tech and ESG mandates makes today the best environment for climate investment.
Nidhi Chadda, founder and chief executive of advisory firm Enzo Advisor, says venture firms should consider making ESG a crucial part of their investment process much earlier than they think.
For her, venture capital firms should think through all the potential risk factors and benefits through an ESG framework. They should bake ESG through the entire investment lifecycle, create impact goals and set benchmarks.
Europe is leading the charge in standardizing ESG reporting aft the EU became the first regulator to try and codify disclosure rules. The Sustainable Finance Disclosure Regulation (SFDR) required European-based financial firms, including VCs, to consider how sustainability risks play into their investment decisions.
But even before SFDR, VCs and their LPs have already been working on integrating ESG to their investment processes.
Mercury Fund co-founder Blair Garrou spent some time learning about the Sustainable Development Goals (SDG) of the United Nations, courtesy of his children who went to Model UN. This experience inspired him to see how his firm can integrate SDGs into their investment strategies.
Mercury Fund then began mapping their investments to the various SDGs – there are 17 in all – and make it a point moving forward to make SDGs a priority. A more sustainability-focused strategy however, does not mean Mercury Fund is transforming into an impact fund, but rather Garrou believes all investors will start making sustainability a key part of their strategies in the future.
San Francisco-based Piva Capital adopted ESG into its strategy and approached deals with an eye toward responsible investing.
Piva partner Bennett Cohen told Venture Capital Journal that investors have been pushing greater awareness in supporting portfolio companies with the appropriate ESG standards, particularly as ESG has proven to not only help move social and environmental good, but also provide strong returns.