VC funds have struggled with SFDR, says BVCA

On Tuesday New Private Markets attended ESG VC‘s The Road Ahead event in London’s Mansion House. Some key takeaways:

• Venture Capital firms have found it more difficult to classify their funds to SFDR Article 8 or 9 than other asset classes, according to Nick Chipperfield, policy manager at the BVCA. “There’s a big question of resource and scale,” he said. “Executing an Article 8 or 9 strategy is resource intensive… For some firms, particularly those without a specific sustainability or impact focus, the costs of launching these types of funds simply outweigh the benefits.” He also cited difficulties that minority investors have in accessing the necessary data, particularly from rapidly growing early-stage businesses.
• Some LPs demand hard ESG data: “We’re only supposed to put our money in places that others don’t want to go,” said Julia Groves, managing director for sustainability at British Business Bank. “If I can’t go back and show the government that we’ve achieved levelling up, that we’ve backed diverse entrepreneurs and that we have inclusive programmes, that we’re enabling the transition to net zero, there will be no more money and that’s not funny. That why you need the data, it’s to be able to demonstrate that we’re achieving the impact.” She added that BB requires evidence that firms are “getting off their bums with intent” to access communities that would not typically be on the investor’s radar.
• A lack of resource at the fund level to respond to data requests is a barrier to ESG uptake in VC, delegates said. ESG VC, a collaboration between GPs, the BVCA and others, is trying to address this. It has produced an ESG measurement framework specifically designed for the asset class, which asks early-stage companies to provide data on 48 metrics.