Bond, the venture firm co-founded by internet guru Mary Meeker, recently signed onto the UN’s Principles of Responsible Investment, becoming the first major US venture firm to do so.
VC firms have largely been hesitant to sign the PRI, which requires signatories to ensure that more than half of their AUM complies with its environmental, social and governance policies. Because VCs are often early-stage investors and minority shareholders, they don’t have the same power as control investors like private equity firms to require their portfolio companies to meet ESG goals.
“Bond signing onto UNPRI is a signal of what’s to come for VC firms,” Chase Wisnowski, vice president for Malk Partners, an ESG advisor to private market investors, told Venture Capital Journal via email. “While VC and growth equity firms historically have been immune from the LP pressures on ESG that their private equity peers have felt for the past few years, the time for VCs to care about ESG has come.”
PRI signatories in private equity are commonplace. Thirteen of the world’s 20 largest private equity managers have signed on, according to recent report by affiliate title New Private Markets.
For LPs that invest in PE funds, “it’s a baseline assumption” that GPs are signatories, “so if a GP isn’t, it is usually considered an outlier,” Paula Langton, head of sustainability at placement agent Campbell Lutyens, told NPM.
In contrast, San Francisco-based Bond is the only one of the 20 largest venture firms on the VCJ 50 ranking that is a PRI signatory . Just three other members of the VCJ 50 are PRI signatories: Shanghai-based 5Y Capital (43), Netherlands-based Forbion (45) and Paris-based Sofinnova Partners (42).
It is worth noting that more than half-a-dozen VC firms that didn’t appear on the VCJ 50 are PRI signatories, including Georgian of Canada, Lakestar of Switzerland and five firms based in the UK: Atomico, Balderton, Cambridge Innovation Capital, Frog Capital and Molten Ventures.
“Bond signing up to the UNPRI is indicative of a shift in the VC and growth space from viewing ESG as something only applicable to the asset heavy industries private equity invests in to a clear lever for value creation and risk mitigation for all businesses, including the small and early stage businesses venture firms invest in,” Wisnowski said.
Bond ranked number 17 on this year’s VC 50, with $5.7 billion in capital raised in the prior five years. It is also the only US firm on the list that signed onto the PRI, based on a Venture Capital Journal review of the signatory list, which includes more than 5,000 names.
Bond signed the PRI on November 4, according to the PRI signatory directory. Partners at the firm did not respond to an email requesting comment.
Meeker, who is well known for her annual Internet Trends report, previously co-led the Kleiner Perkins Digital Growth Fund, which became Bond in 2019. She launched Bond with Mood Rowghani and Noah Knauf, who co-led the Digital Growth Fund, and Juliet de Baubigny, formerly a Kleiner Perkins senior partner.
Bond invests primarily at the late stage. Of the 19 deals it has done this year, 12 are late stage, five are early stage and two are seed, according to PitchBook. The firm does not bill itself as an impact investor or have an emphasis on investments focused on helping the environment or advancing social justice.
However, Bond has made several investments that have an ESG feel to them, including:
- KoBold Metals, an AI-powered mineral exploration company that targets materials needed for electric vehicles and renewable energy;
- Maven, a digital health platform aimed at improving care and lowering costs for women and families;
- Meati Foods, maker of plant-based foods; and
- Sunday, which offers lawn care products that it says are better for the environment than traditional fertilizers and pesticides.
Bond has not said why it signed the PRI, but it may be simply to make itself more compelling to founders it wants to invest in. Late-stage venture and growth investors who spoke on a panel discussion at PEI’s Responsible Investment Forum in September said company founders are increasingly driving the ESG conversation.
“On the founder side, I think we’re seeing a much more heightened focus on both impact and ESG measurement,” one panelist said. “People feel like the world has changed and these so-called non-economic variables now have heightened meaning.”
Another panelist noted: “What we continue to see is an increased trend of adoption where founders are more and more looking for help and are willing to engage [on ESG issues].”
Launched in 2006, the PRI has grown to 5,179 signatories, representing $121 trillion of assets under management, according to its most recently quarterly report.
PRI signatories are guided by six principles, including agreeing to “incorporate ESG issues into investment analysis and decision-making processes,” to “be active owners and incorporate ESG issues into our ownership policies and practices” and to “report on our activities and progress towards implementing the principles.”
A white paper published by the PRI in January noted that “significant barriers to mainstream adoption remain” in the venture industry. Among them, “there is a perception among many venture capital GPs and early-stage companies that ESG issues are not material to the asset class – due to their early-stage nature, the high failure rate of investments and a growth-at-all-costs approach that sidelines these issues.”
The paper also notes that VCs’ influence over portfolio companies is limited because they aren’t control investors, LPs focused on ESG “have little influence over successful venture capital firms” and “few tailored resources are available to help investment managers better understand how to set relevant ESG metrics and targets in venture capital.”
To help with ESG due diligence for venture funds, the PRI recently published an ESG due diligence questionnaire for LPs.
Peter Dunbar, head of private equity at Principles for Responsible Investment, wrote on LinkedIn: “[W]e heard anecdotally that some limited partners (LPs) are afraid to engage general partners (GPs) on commercial and ESG issues at the risk of being blocked from receiving an allocation to a fund.”
Dunbar added: “Pragmatic and stage-appropriate ESG incorporation needs to become a mainstream part of the venture capital industry, and LPs and GPs must work together to make this happen. We will support signatories to play their part – our dedicated DDQ is part of a broader work program to do just that.”
Wisnowski of Malk Partners said the move by Bond could lead to more VCs signing onto the PRI. “While it may not happen overnight, recent events like the collapse of FTX, UNPRI’s new VC ESG DDQ template, and the proliferation of AI into every aspect of our lives, has prompted LPs investing in venture and VC themselves to really start to care about ESG and think through the right approach to integrating ESG into the venture space,” he said.
“While it may take a few years before we see a large contingent of VCs sign up to the UNPRI, it is where the market is heading, and those who do sign up and can develop a clear narrative around how they integrate ESG into their investment processes will be well positioned to capitalize on shifts in LP expectations, regulation, and consumer/customer preferences.”