Towards a sustainable and efficient ESG approach in the venture capitalist world
Let’s start with the conclusion. I believe that investors have a full responsibility to play in the world in which we live, including environmental, social and governance issues. I do not believe that fully assuming this responsibility depends on reporting and data collection.
Also, I believe that the order of the acronym ESG should be different. Perhaps GSE should be better, because of the importance of the G in all the decision process, including S and E.
Of course Daphni has an ESG policy and signed the France Invest ESG Charter. But, who cares ?
An internal ESG policy has to be embodied in order to grow and shine, even externally.
Let’s take a journey together.
TODAY
Back to basics
The ESG criteria via our investments
This criteria is part of our deal flow analysis process. This criteria is quite subjective and qualitative since the companies we invest in are very young. It then includes by nature extra-financial criteria. Basically, we are particularly eager to invest in companies which make sense for the world, and which can enhance sustainability. We are fervent believers in how technology could help develop new usages, for good. We like the idea that innovation can improve the world we live in. Just remember our baseline — Build Da City. For. Good.
Moreover, as well as all of our peers, we do not invest in certain prohibited sectors (drugs, alcohol, weapons…).
Finally, we are compliant with all the anti-money laundering set of regulation.
Once the investment has been made, we ask each quarter a set of data to our portfolio companies. The results are released in our quarterly report sent to the LPs.
The ESG criteria and our dear investors
Randomly (which here means “not the same questions, not at the same time”) some of our investors ask us to answer their ESG questions, regarding the management company and each of the companies we invested in.
Only for Daphni Purple we receive one demand in March, two in April, one in June and one in July.
The questions are not really made for venture capitalist funds. They are designed to be convenient with real estate, infrastructure, private equity, LBO, growth funds.
Moreover, as companies founders priority is not to report unstructured data, it is practically impossible to receive from dozens of companies the numerous dense and heterogeneous data required by our investors on request.
What are we really proud of? What is really sustainable and efficient?
We at daphni are not just answering questions on a reactive mode but we are proactive in our initiatives.
At Daphni
In early 2019, daphni became a Venture Partner in Included VC. It is an initiative to help increase diversity in Venture Capital by sharing knowledge about everything surrounding VC — from deal flow analysis, to fund structure to branding. The 12-month program is run together with Notion Capital, Mangrove, Enern, Point Nine, K Fund, Seedcamp and Santander, with the first cohort selected during late summer and the first masterclass taking place in October. Throughout the year, we will host more masterclasses, retreats, workshops and mentoring for 30 fellows selected for the first cohort. The goal is to place 10 paid interns or analysts within venture capitalists funds or portfolio companies.
Daphni supports the French association WakeUp Café aimed at supporting inmates. The association offers rehabilitation courses, individual support and a community, with the goal of fighting recidivism and isolation. Daphni took part to the purchase of the Thalassa boat parked on the Seine which will be reconfigured in a restaurant and reception place managed by former inmates.
Daphni is sponsoring the famous skipper, Romain Pilliard, who founded Use It Again to prove that it is possible to design things differently — at all scales and in all fields. Romain is tackling the reduction of natural resources and the plastic pollution in our oceans. In order to educate the market, Use It Again participates in international races to promote the initiative and in education programs to explain the necessity and benefits of a circular economy to the young generation. Promoting a circular economy is at daphni’s core, which is demonstrated in our involvement and support given to portfolio companies such as Backmarket and Geev. For us, supporting Romain and Use It Again was a given, as we work towards the same goals.
In December 2019, we decided to support one of our dear daphnipolitans, Said Sofiane Ammar, who has created the inspiring NGO, Chams, together with Antoine Meunier. Chams is a non-profit startup that builds and operates coding schools and entrepreneurship bootcamps, in and near refugee camps, with the ambition to train 10,000 students by 2025. The non-profit has designed a peer-to-peer tech education solution to train cohorts of 30 to 300 students. Chams partners with local and international stakeholders in refugee host countries and has initiated operations in Jordania and Kenya. We will help Chams to find missions for its refugees in our startups.
Circular economy
The environmental impact of a smartphone production is about 30kg of CO2 (12 liters of clean water). Back Market sold more than 200,000 tech products since their launching. It has avoided more than 6,000 tons of CO2 emissions in two and a half years.
Geev is making easier the capability of people who want to give what they do not need any more instead of putting these items in the bin. This behaviour relies on the common sense to avoid destruction of items in a market where recycling is far from covering 100% of what is put in bins. By doing that, Geev accelerates the matching between offer and demand.
Carbon footprint reduction
FretLink reduces pollutant emissions in the road transport sector by allowing carriers to complete their loads, find relevant counter-flows and optimize their transport capacities.
The carbon footprint study is done and published.
Foxintelligence is the editor of Cleanfox. Cleanfox is an application that improves your carbon footprint by cleaning your inbox (each email generates 10g carbon dioxide per year). The company has helped 3,040 million users so far and deleted 1,634 million emails.
The final objective of the company is to propose a credible alternative to personal cars for urban mobility, to improve modal transition from cars to bikes. In this prospective, the company is involved by essence in the reduction of GES emissions.
Hemea makes it possible to have a better energy efficiency of the buildings following the works.
Social innovation
Comet set up a strongly defined onboarding period. Women AND men benefit from paid leave to take advantage of the birth of a newborn child.
The opportunity for all company employees to experience freelancing once a month. Transparency on employment contracts templates and remuneration policy. women AND men benefit from paid leave to take advantage of the birth of a newborn child.
Remote work has been highly promoted during the strike period in France. Foxintelligence invested in IT equipments so that every single employee is able to work from home.
Diversity
Holberton is a new kind of university for developers, giving access to higher tech education to the many. Holberton School is training the next generation of full stack software engineers via a 2-year alternative to college. The company has now 9 schools announced (San-Francisco, New Haven, Bogota, Medellin, Tunis, Barranquilla, Beirut, Cali and Tulsa)
Goshaba wants to bring more efficiency and diversity in the recruiting industry by better evaluating soft skills through cognitive games.
Local and responsible food
The containers are 100% recycled. No chemical pesticides are used. Water requirements are decreased. The electricity is 100% recyclable thanks to an agreement with Enercoop. The goal is to deliver strawberries (and then other fruits and vegetables) “ultra-locally”, in order to have a positive impact on the agriculture carbon footprint. Today agriculture represents 25% of global carbon footprint; and the average length travelled by fruits and vegetables from field to plate is about 1500km.
Beendi produces organic plant-based food. Beendi’s mission is to produce delicious plant-based food to target the mass market, in order to help people who wish to reduce their meat consumption.
TOMORROW
Does the entire ecosystem (from investors to venture capitalist funds to the companies themselves and the employees of all these actors) want figures, percentages, reportings, cross checking ? (Answer A) Or does they prefer building da city, for good ? (Answer B).
If the answer is A, then let’s count the number of junior girls in the team (so as not to focus on women leaders, executives, board members or shareholders) and the number of sheets of paper we didn’t print last year.
However it seems that we are once again entering the following vicious circle :
- the investors are engaged in an ESG approach they don’t control anymore (dedicated portals, resources, budgets, third parties in order to deal with data…)
- the venture capitalist funds ask for numerous and irrelevant questions to their portfolio companies
- the companies (especially if they’re young) don’t have data and have other priorities
- in each entity the subject is under-delegated, so that nobody is responsible, as long as the reporting is completed
- each quarter information is the same, un-qualitative and boring
If the answer is B, then the questions are : How to access, enhance, share and promote the most sharp, relevant and qualitative information from the portfolio companies ?
Let’s try to meet a virtuous circle in order to satisfy everybody and to access the “Build da city. For. Good”.
Our investors want to access information. We understand that. Most of them are aware of our ESG approach (which is more qualitative than quantitative) and agree with it.
The portfolio companies are under pressure.
Nobody can claim he or she is “against ESG”.
Thus it shouldn’t represent a nonsense and bureaucratic task.
As of today, we can’t predict if the entire ecosystem, including regulation, investment and investors world, will answer A or B. I have a dream, that one day, the answer will be B, including a treatment of the ESG issues at the board level, and an inclusion of ESG data directly in the financial statements. But unfortunately I am not sure that the history of regulation since 2008 goes in this direction. Who wants to bet ?
