Solving VC’s ESG Puzzle
Upstream investment strategy remains the greatest lever for impact downstream.
“How does a venture firm ‘do’ ESG with early-stage startups?”
This is a common question that comes our way — from venture firms, limited partners, academics, and the media — and the answer is, well, not so obvious despite a craving for simplicity.
Environmental, Social, and Governance (“ESG”) standards are having a moment with climate change (and climate risk), broad socioeconomic disparities, and questionable corporate behavior in the zeitgeist. Talented employees (in a tight labor market) and consumers (in a crowded landscape) care more deeply about matters related to ESG unlike any time in our lifetimes. While big business has been on the ESG train for slightly longer due to mechanisms like SASB (type “ESG” into Google for a healthy serving of strategy consultant ads on how to “do it” well), financial services — especially venture capital — is having to catch up.
The reason VC’s are gaining ESG altitude is simple: institutional investors and family offices are now leaning in.
As a result, many top tier firms have launched dedicated impact funds tied more closely to ESG metrics (see: TPG Rise, Bain Double Impact, 500 Startups, KKR, Blackstone, and more). Most…
