Small, lean teams and a general lack of market guidance mean that venture capital firms are behind the curve when it comes to ESG considerations. That is the gist of an article posted last week by the UN-backed PRI.
The PRI’s private equity specialist Peter Dunbar and two members of VentureESG, an industry collective of 170 VC firms, note that interest from the VC community in ESG is rising – especially in Europe – but that it lags private equity. The team surveyed VC firms on their attitudes to ESG and reported, among other things, that:
- “ESG is still primarily conducted in a silo and rarely contributes to systematic and thorough analysis and/or investment decision-making;”
- “Most respondents were keen to [note] that it was them personally or their fund that embraced ESG as a set of values and was the most crucial driver. However, only a minority felt that LPs or their portfolio companies or founders were pushing them.”
The authors also highlight a “lack of understanding around key terminology” in VC. “Many VC impact firms have been established with a blend of impact and ESG practices, but the difference between the two is not well understood.”
In November, PRI will publish a discussion paper on this topic and is gathering case studies to launch in the first quarter of 2022.
- A report from Amnesty International in August drew attention to big venture’s apparent disregard for human rights.