Net Zero 'least important motivation' for VCs, study finds

The study found that 45 percent of VCs include a 'diversity clause' in their term sheet.
Net Zero 'least important motivation' for VCs, study finds

ESG_VC, in partnership with Marriott Harrison, has carried out an investor survey of 91 VCs across the UK, Canada, USA, Australia, New Zealand, Africa, and Asia on their attitudes towards ESG initiatives.

‌The study found that ESG is viewed as an opportunity to drive growth rather than a tool for achieving net zero, with More than half (54%) of those surveyed citing ‘achieving net zero’ as the least important motivation for their ESG initiatives.

VCs reported a lack of in-house ESG expertise. Only a third (29%) of VCs have sustainability specialists leading their work on ESG. This is despite 54% of respondents now publishing an annual ESG report, 91% of firms now having an ESG policy, and 87% having a named ESG lead. This is leading to a growing volume of work falling onto broader teams that may lack formal training in ESG and sustainability, heightening the need for industry collaboration and resources.

ESG has, however, been factored into deals and is becoming a market standard, with 70% of VCs including a 'sustainability clause' in their term sheets and 45% including a 'diversity clause'.

Henry Philipson, Co-Founder and President of ESG_ VC, commented: “This research shows the challenging position many VC firms find themselves in today. Investors are clear on the need to prioritise ESG and sustainability as significant drivers of value in their portfolio, but they often lack the resources or expertise to act on these objectives. ESG_VC and Marriott Harrison are, therefore, playing a key role in collaborating with the ecosystem to build a pragmatic roadmap for deploying ESG within start-ups.”

David Strong, Head of Venture Capital and a Partner at Marriott Harrison, commented: “ESG frameworks have been brought to the forefront of many discussions within the private markets and this was clear from the initial ESG_VC report. Diving deeper into the investor survey has been enlightening. In particular it is interesting to see the findings on term sheets where diversity and sustainability clauses are becoming more prevalent in European term sheets (contrary to the direction we are seeing sentiment moving in the US).”

‌The investor survey comes following its analysis of ESG data collected from 587 start-ups backed by leading venture capital firms including Atomico, Molten, Beringea, Oxford Science Enterprises, and Astanor.

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