Writing a Diversity, Equity and Inclusion Statement for your VC fund’s ESG policy.

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DEI @ Work

8 min readFeb 12, 2021

Abstract image of triangular textured lights in purple, yellow and orange — Photo by Stephen Johnson on Unsplash

The individuals and institutions that control how money is allocated decide how opportunities are distributed. With this in mind, how can VC (Venture Capital) funds play a role in contributing to environmental and social issues? A recent article from TechCrunch explores some of the current progress and challenges on the topic in Europe.

The conversation is timely, as the European Union has recently created an Action Plan which requires financial institutions to focus on sustainable finance. The Action Plan has the following objectives:

to reorient capital flows towards sustainable investment
to mainstream sustainability into risk management
to foster transparency and long-termism

Part of the Action Plan includes the SFDR (Sustainable Financial Disclosure Regulation) which stipulates that financial institutions in Europe must make sustainability related disclosures by March 10th, 2021. The SFDR requires an ESG (Environmental, Social, and Governance) approach to be disclosed on a fund’s website, in pre-contractual documents and in reports.

What is ESG?

An ESG policy is created by investment companies to demonstrate their commitment and consideration of environmental, social and governance concerns. An ESG policy can be mandated depending on regulations (as with the SFDR mentioned above) or required to access certain types of funding. Beyond regulatory and bureaucratic requirements, it’s also useful to communicate with your stakeholders.

Environmental, Social, and Governance (ESG) refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business. These criteria help to better determine the future financial performance of companies (return and risk). (source)

A strong ESG policy allows your fund to demonstrate the values you stand for. It also supports making more impactful, informed decisions. A focus on Diversity, Equity and Inclusion is one important and relevant aspect of an effective ESG policy. This blog will not go into depth on ESG policies in general but rather focus on why and how to craft a Diversity, Equity and Inclusion statement as part of an ESG policy.

What is Diversity, Equity and Inclusion?

Diversity encompasses all the ways in which people are different. That includes visible differences like race and ethnicity, gender and age as well as invisible aspects like cultural background, class, religion, sexual orientation, disability (can be both visible or invisible), language, cognitive differences, or life experiences. These differences shape who we are as human beings; they influence our way of thinking and our perspective.

Inclusion means creating an organizational culture where people can bring their differences to the table and thrive professionally; where they feel that they belong and are valued, especially if they’re different from the majority. Inclusion means making sure that everybody is heard and able to participate. Inclusion is needed to unlock the potential of diversity, to engage with diverse perspectives and experiences — enabling people to contribute at their highest levels. When an organization achieves inclusion, employees should be able to show up as their authentic selves without having to hide parts of their identity for fear of exclusion.

Equity is the fair treatment, access and opportunity for all people by striving to identify and eliminate systemic or individual barriers that prevent the full participation and engagement of some groups and individuals. Improving equity involves increasing fairness by recognizing institutional and environmental systems of injustice and oppression as well as unequal distribution of resources and opportunity.

Why write a Diversity, Equity and Inclusion Statement?

A diversity, equity and inclusion statement is a public statement to your employees, investors, partners and portfolio companies. It allows you to clearly articulate the DEI values your company has. The process of creating a statement is an important step that brings about necessary conversations among general partners. This helps them explore their own understanding and ambitions in supporting a diverse and inclusive ecosystem. And it helps them clarify the impact they wish to have. This alone is a valuable step. But creating, aligning and communicating a clear and impactful diversity, equity and inclusion statement has other benefits as well:

It will help you create a more diverse, equitable and inclusive company.
By reaching more diverse networks, it will help you reach more diverse opportunities for investment and help you make better, more informed and holistic decisions.
It will set you apart from your competitors because your DEI position will be visible and transparent.
It will provide you benchmarks and goals to help measure your success and impact.

How to write a DEI Statement?

Step 1. Understand how DEI intersects with your industry

Explore how the products of the industry contribute to societal inequalities. Check out some books about how tech can perpetuate and amplify these inequalities:

Take some time to reflect on the impact your fund has had so far. Think back historically about your portfolio companies. Are their leadership teams diverse? Do the products or tools they build perpetuate inequalities in society?

Step 2. Consciously decide to make a commitment

When investing in founders, think carefully about how opportunities in your industry (for example the opportunity to found and bootstrap a new company) are affected by social injustice and lack of inclusion. Now, honestly ask yourselves, is this an area where your fund wants to actively work to make change? Here are a few questions to help you assess this:

Can you articulate the values you want to strive for? Are you able to put processes and governance in place to focus on DEI? Are you willing to bring up diversity considerations during the due diligence process? In some cases, would you be willing to pass on hiring job candidates or investing in founders if they don’t match your values?

Make sure all of your GPs (and the bodies that make investment decisions, if broader than your GPs) are fully in agreement on these values.

Step 3. Understand what you can commit to and track your progress

It’s important you are able to fulfill what you commit to in your DEI statement. For example, if you commit to supporting underrepresented founders to gain opportunities in the ecosystem, make sure you put in place a program or process to do so. If you focus on supporting your existing portfolio companies to have DEI in the foresight of their decision-making, provide them tools and resources to do so. If you set commitments, make sure you create KPIs and invest the time to measure and report on their success.

As you begin to align on your values and your commitments, start to craft your statement.

Keep in mind

Achieving gender diversity (for example women founders or women in leadership) is not the ultimate achievement in actually building diversity in your portfolio or leadership team. Approach diversity holistically and intersectionally. Diversity covers race, ethnicity, ability, nationality, LGBTQI+ and so much more. Diversity is more than just having women in leadership.
Talk with your LPs, portfolio founders and employees about their experiences and their confidence in such a statement. Listen to them. If your commitments ring hollow to them, then you have deeper issues to focus on before publicly communicating a statement.
Do not make promises you can’t keep. Before you publish anything make sure you truly stand behind it and have dedicated the resources (budget and staff time) to live up to those promises and measure your progress.
Embed your commitment into your processes. If attention to this topic ends after you publish the statement, then you haven’t properly embedded it into your processes. You should reference it often, as you make hiring decisions or investment decisions and as you put in other policies (such as HR policies). It should become a part of your culture.

Here’s an example DEI statement as part of an overall ESG policy for a VC. Feel free to reference this statement for inspiration.

Diversity, Equity and Inclusion Statement

At [fund] we believe that a diverse, equitable and inclusive work environment makes a more relevant, competitive, and resilient company. We actively work to foster a culture of inclusion and recognize the value of diversity. We are committed to treating each other with respect. We value the insight and perspectives contributed by people from diverse backgrounds, genders, ages, abilities and sexual orientations. We recognize that varied lived experiences bring needed insight and perspective that ultimately helps us make better, more informed decisions.
We recognize that access to resources and opportunities needed to pursue founding a company are not equitably distributed in society. We acknowledge our own role and responsibility in addressing those inequities. We support the ecosystem through outreach and mentoring to underrepresented founders. In seeking and reviewing companies for investment, we give priority consideration to companies with diverse founding teams.
For our portfolio companies, we actively support building diverse teams and encourage behaviors that support an inclusive, respectful and safe working environment. We provide individual guidance to our portfolio companies on making sound and equitable hiring decisions to build a diverse team. We also provide support to create an inclusive working environment that is psychologically and physically safe and ensures everyone can be heard and valued for their contributions. We will be requiring any portfolio company, where we are the lead investor, to adopt their own diversity policy in place within six months of our investment. We are committed to providing whatever support is necessary to ensure this happens.
In order to be eligible for follow-on investments, we require our portfolio companies to assess the diversity of their leadership teams, and if needed, create a plan to achieve diversity in those teams. We also require the HR team to create and track metrics to support an inclusive work environment as well as offer resources and training to employees to educate them on unconscious bias and how to deliver on their individual responsibility to contribute to an inclusive workplace.
From our employees, LPs or our portfolio companies: we do not tolerate any discrimination based on race, ethnicity, gender, religion, disability, age, sexual identity or any other form of identity.

And a final note: when assembling your values and commitments to DEI, it’s easy to say the wrong thing or for your ambitions to lack integrity and authenticity. If you tell one story, but live another, your stakeholders and the ecosystem will notice. There are a lot of experts out there who can give you good advice on writing and living the values of an authentic DEI commitment for your fund. If you don’t have the expertise in-house, pay the experts to help you.