Friday Letter: Investors shouldn’t ignore the shifting winds when it comes to ESG

There’s been a hot topic in the news lately, and no, I’m not talking about GameStop or Robinhood. It’s ESG.

With the new Biden administration taking office last week, the US president issued as his first act an executive order to rejoin the Paris Climate Agreement. Couple that with the Democratic control of the Senate, and I’ve heard from investors that this is a clear indication there is an opportunity for climate tech investing.

Meanwhile, the pandemic and social protests of 2020 is spurring change throughout society, and in the investing world, too. I hear weekly from multiple firms that they are considering their ESG strategies or investing in ESG technologies to help companies sort our their own corporate strategies.

One rep of a billion-dollar fund manager told me that “ESG is definitely top of mind. Not only because it’s the right thing to do, but there are regulatory requirements impacting companies, and VCs included.”

So it was no surprise to me this week when we posted a story this week from Alex Lynn about the founder of Cathay Capital – which includes their venture operation Cathay Innovation – how LPs are pushing the international firm firm to start an impact fund.

Cathay recently hired Matthieu van der Elst, the former CEO of Michelin Ventures, to be its first chief impact officer.

Separately, I recently talked with Denis Barrier, managing partner of Cathay Capital and co-founder and CEO of Cathay Innovation.

“As a venture firm, sustainability and impact is growing more important,” Barrier told me. “Impacting investing and ESG was for a long time in a different bucket than the focus on returns. It was, ‘You do good and not worry about returns.’ But now it’s all integral. Return, risk and impact.

Let me know what you think of ESG and if you agree that more GPs are adopting the principles with a push from LPs. You can drop me a line at agoldfisher@buyoutsinsider.com, and I’m happy to chat.