Norwest’s latest and largest fund comes with a formal ESG policy

Multistage investor Norwest Venture Partners has raised $3bn for Fund XVI, its largest fund to date and its first to include a formal ESG policy.

Venture and growth-equity investor Norwest Venture Partners announced on December 14 that it raised $3 billion for its latest and largest fund to date.

Fund XVI, which comes two years after it raised $2 billion for its prior fund, is another example of a continuing trend in the venture world, as large multi-stage investors raise larger funds and return to market sooner than in prior fundraising cycles.

Norwest has altogether raised $4.7 billion in the last five years, according to the VCJ 50, a ranking report released last month by Venture Capital Journal, establishing Norwest as the 11th-largest venture firm worldwide.

But for Norwest, its latest and largest fund in its 60-year history is also notable for another reason, which is growing increasingly more common in venture investing: the firm has officially introduced an ESG policy “in parallel with our continued commitment to diversity, equity and inclusion,” said Sonya Brown, a general partner at the firm.

Brown, who co-heads the growth equity practice at the firm, added that Norwest is not becoming an impact investor at the firm. She said the focus is on high returns for its LPs.

“All of our partners think about this on a daily basis, and it’s something we’ve been doing for a while,” she said. “We have long invested in companies capable of driving lasting change and will continue to do so with our new fund.”

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Sonya Brown, Norwest Venture Partners

Norwest said that its recent investments in companies with an environmental or social focus include Classy, Grove Collaborative, ICON, Imperfect Foods, and UPSIDE Foods. The firm added that its focus on DE&I, including its investments in founders from underrepresented groups, has seen it back 52 women-founded companies to date, most recently adding Babylist, Pequity and Praxis Labs to the portfolio.

The firm told VCJ that its ESG policy will help define its approach to due diligence, investment and portfolio management processes, “making us more rigorous around considering the social and environmental implications of our investments.”

The firm explained that before a company is brought to its investment committee, it must pass through screening process, and any company that is in violation of the UN Global Compact Principles will be excluded from consideration.

“During the due diligence process, we focus on whether the target is willing or unwilling to engage on ESG topics in order to inform later engagement,” the firm said. “The goal here is to encourage all our businesses, including those that are not explicitly mission driven, to be climate and social justice conscious.”

For current portfolio companies, the firm said it will provide ESG portfolio services to help its companies on ESG. Norwest add that it is in the early stages of ESG implementation and is taking an intentional approach towards firming up what data and metrics will be reported as parts of its ESG rollout.

Brown said the ESG policy impacts the entire ecosystem, from the Norwest team of investors, its LPs and the firm’s portfolio, including customers as well as current employees and prospective employees recruited by the portfolio.

“Part of this ESG policy is also helping our portfolio companies through ESG and DE&I and being a supportive resource for them,” she said.