While other investment sectors made major pushes into ESG investing way earlier, venture capital funds lagged. ESG stands for "environmental, social and corporate governance", three major factors in measuring an investment's sustainability and societal impact. This includes fundamental principles, from diversity and board structures to labour relations, supply chain, data ethics, environmental impact and legal requirements.
Over the last several months, quite a few mostly European VCs started to tackle ESG initiatives. In addition, a group of 25 VCs led by GMG Ventures and Houghton Street Ventures formed a community around ESG for VC. The goal is to share their expertise from the bottom up and fill the gap of missing knowledge.
The two main drivers for this surge in responsible investment are: (i) increasing awareness of activities that may have an influence on external events, such as climate change and social justice; and (ii) increasing awareness of how ESG adoptions can promote targeted business goals, such as increasing sales, recruiting excellence and reducing operational risks.
Find more detailed information on how VCs and start-ups are influenced by responsible investing here.
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