According to new findings published by Impact House, environmental, social, and corporate governance (ESG) and sustainable development goals (SDG) rank fifth on the minds of European tech investors and are preceded by the management team, value proposition, scalability, and market size.
Despite the lower ranking, 68% of the 202 European Tech investors that were surveyed agreed that a company’s sustainability factor increased its valuation, with 80% noting that sustainability has to be an integral part of the startups’ business strategy.
And although the majority of investors are looking to see ESG and SDG factors in their portfolio companies, why then do the topics perform so poorly on the overall investment decision? As Impact House found, perhaps the answer lies in the fact that at present, there is no one globally recognised framework from which tech investors can measure these goals with.
“47% of the respondents state their methodology is tied to United Nations sustainable development goals. Some investment funds note that they rely on the “Venture ESG” framework, “IRIS+,” “Life Cycle Assessments,” or “Impact Management Project.” Likewise, the study does point out that the data might be skewed in the sense that investors surveyed, “are already interested or involved in the subject, so this might not be a completely objective representation.”
“Without standardised practices on ESG reporting, investors often end up with scattered, unanalyzed data. Written ESG reports from multiple portfolio companies easily get a “nice to know” tag due to inexact, broad information,” commented Rundit customer success manager Viivi Halinen. “Without a standardised way of reporting, ESG results may be hard to aggregate, analyse and most importantly, improve.”
“Sustainability is a business opportunity and something many investors see value in. I’m delighted to see this also in the report results as that is the only realistic way for us to move forward reaching climate goals,” concluded Impact House founder and sustainability advisor Kristine Nagle.