I’ve been in the impact investing domain for almost two decades now. I was very lucky to be in the right place at the right time, because the field of impact investing didn’t really exist when I started to work on it. I was managing an internet company during the dot-com era and when the bubble burst, I spoke a lot to our team and investors about the underlying reasons for the crash. The more we spoke, the more we saw that a disconnect between capital and values had brought about these unreasonable valuations.  

Since we were all part of the high-tech business, working with great entrepreneurs and new technologies, we decided that it was time to bring values and capital back together. In the early 2000s, we started to experiment on many different business models at the intersection of capital, values and tech. It was a really exciting time without any limitations, because nobody knew anything about impact investing yet. Today, you have official terms that you can google, but back then we could invent everything ourselves. 

Even before that, I always felt strongly that the worlds of capital and value needed to converge. When I look at myself, I think of myself as one holistic person. I’m a human, but I’m also a business person, a student, an environmentalist and a parent – so why should I live in silos? 

“…without the help of ground-breaking technologies, we will never reach the UN Sustainable Development Goals…”

I am really happy to see that this holistic view is growing and is already very engrained in the younger generations. The main reason I see for this is that we do everything on our phones today. Whatever we do – going out, scheduling meetings, talking to our children – we do it on our phones. Everything is converging today. This is the compelling message that I’ve transported for 20 years and where my passion lies.  

I’m really excited about the power of technology to make disruptive change happen. If you look at the impact investing world, you will find that 98% is in technology that is not high-tech. This is a big problem, because without the help of ground-breaking technologies, we will never reach the UN Sustainable Development Goals by 2030. We will not solve the climate crisis, we won’t create true social equity and we will not fix social disparities without high-tech. 


How do you shape Pitango’s strategy as its Head of Investment and Sustainability?

At Pitango I created a strategy that looks at two sides of the impact investing equilibrium. The first is the question of how we can better support “impact natives” in need of capital, meaning startups that intentionally focus on impact. We added an impact and sustainability layer to our due diligence that is presented to the investment committee, and we work closely with the companies on impact once they join us.

“We added an impact and sustainability layer to our due diligence that is presented to the investment committee…”

At the same time, I didn’t just want to wait until our early-stage startups matured, because this can take many years. Pitango already has about 70 portfolio companies, so what about them? Why not migrate them too, helping them to identify the impact they are having and achieving their goals in this area? If this process is successful, they will bring their impact methodologies into their mainstream activities and won’t even have to call it impact. It will simply be a better way for them to do business! 

Both parts of the equilibrium are really important to us. We need to bring more impact startups into our investment process, but we also have to migrate our existing companies. We see this as the best way to bring impact into the mainstream without turning into a pure impact fund. 

Our reason for not wanting to turn into an impact-only fund is that such funds focus purely on companies who outcomes relate to the Sustainable Development Goals. However, there are many business models who do good for society that are not considered classic impact investments. With Pitango, we also want to support those types of companies and help them create a strong ESG infrastructure. This is an important distinction, because many people in VC funds think that they cannot do ESG because that would mean that they only do impact.


You have your own impact framework called the ESG to Sustainable Development Continuum. Can you explain more about this framework and how you integrate it into Pitango’s processes? 

For us, impact is all about the convergence between ESG and SDG. The continuum starts on the ESG level and goes all the way to SDG compliance, meaning that it is a scale. First of all, it is important to note that we don’t invest in companies that create any harm. If we do see an intention to do good and a business model that is aligned with positive impact, then we can work with the company to transition them from intention to compliance. 

On one side of the spectrum, we have companies who have a “do-no-harm approach”, but don’t actively integrate ESG into their business activities yet. Next, there are businesses who actively pursue ESG activities and have an understanding of their impact, but don’t measure it. The next step of the continuum are companies that apply ESG and have an understanding of the SDGs, but don’t measure it. Then we take them to the last level, which is real compliance – meaning that they apply the Social Development Goals to their business practices and really understand how their product relates to those goals. 


How do you help founders adopt ESG practices and be accountable when they are in the grind of running their company?

It very much depends on the phase and size of the company. At the start, I will usually work with one of the founders on designing an impact strategy, making sure it blends into their business plan and working together on implementing the strategy.  

As they grow further, we work with the founders to identify the environmental and social effects of their product and help them recruit an internal impact taskforce, where every person on the taskforce is in charge of a different part of the organisation. The first thing we usually do with them is to review how their company lines up with the SDGs and find the areas that need improvement. In established companies, this is gradual and not an overnight change. If you want to have a better-balanced management team, you will not fire half of your managers just to have gender equality. 

At the beginning, I usually get together with the taskforce on a weekly basis. We work on several impact frameworks like the Five Dimensions of Impact and the Theory of Change, and also make sure that the companies collect a lot of data that we analyse together. We typically move the meetings to once every two weeks as the work starts becoming more internal. Eventually, we create a report that tells the story of the company through the social, environmental, ESG or SDG lens, which also helps define the KPIs that need to be improved in the future. 


How can impact contribute to a company’s valuation? How do you see the connection between impact or ESG and valuation evolving over time?

I think over time, there will not be any companies that don’t have ESG embedded in their business model. More and more research will show that better-managed companies provide better results. Eventually, investors will be drawn towards these companies both because they want to do good, but also because of better results. 

“Whatever business you are in, you can always include impact parameters into your investment decisions…”

 Impact is becoming a cross-border and cross-sector phenomenon. Whatever business you are in, you can always include impact parameters into your investment decisions and business model. And if you do so, you will be more profitable. You don’t have to invest in agriculture or health care to make an impact – you can also invest in smart cities, mobility, cyber security or prop-tech. Whatever you invest in, you can choose to be accountable – and this is how impact will move from the niche to the mainstream. 

I have a few friends who are all internet entrepreneurs and investors from Berlin and more or less ambitious surfers. On a surfing trip one and a half years ago in Tenerife, there was a day with little waves.

We got into a long discussion around climate change, our role in this crisis and if we are doing enough as entrepreneurs and investors. At the time, most of us were offsetting our carbon footprint, but that was mostly it. Nobody was politically active or really leveraging her or his assets.

This conversation was the starting point and over the next couple of months, we as a group committed to taking action by starting Leaders for Climate Action. Since then, over 400 companies with 100,000 represented employees have joined; we´ve expanded to other European countries and achieved more than a quarter million tons of carbon reduction and offsets in a little over a year.

What are your main initiatives with Leaders for Climate Action?

Our primary objective is to help entrepreneurs run their companies in a much more eco-sustainable way than they did before. This includes their entire up — and downstream supply chain, their office environments, and travel policy.

We empower them by providing scientifically-verified frameworks to measure and offset their carbon footprint on an annual basis, so essentially, it’s a reinforcement cycle. The measuring is done together with third-party climate auditors, where different measures –depending on the industry– come into play for the reduction.

For example, a software company where most of the footprint comes from server electricity is a completely different game than let´s say Zalando, which ships physical fashion products across the world. When it comes to offsetting, we cooperate with Gold Standard certified partners to really yield the results that are promised.

“Our political agenda is very narrowly focused on implementing a Germany- and European-wide price per emitted carbon ton north of 80 to 100 Euros.”

The secondary objective of Leaders for Climate Action is lobbying work. We coordinate efforts to publish papers, speak on panels, meet politicians on a national level and increasingly European level, and harness the power of our member brands like Zalando, Flixbus, Celonis, and Delivery Hero to gain attention from political decision-makers.

Our political agenda is very narrowly focused on implementing a Germany- and European-wide price per emitted carbon ton north of 80 to 100 Euros. Today, politicians are talking about 20 Euros per ton, but only at the level of 80–100 Euros will it really have an impact on changing consumer and enterprise behavior. At 20 Euros a ton, it simply goes unnoticed.

How do you see the approach to ESG changing in tech companies, independently from investors?

Especially in the past six months, alongside Covid, Black Live Matters, and climate change becoming so obvious that you can´t ignore it, there has been a strong uptick in the ESG momentum across tech companies. You can see with the pledges by Apple, Amazon and Google that the giants are making serious efforts to become carbon neutral in the next 10–15 years.

“In the end, it is all about accepting entrepreneurial responsibility for the people and the planet and not seeing yourself as a pure financial profit generator.”

Here too, different business models require different measures. For some, it is easier to get there, for some it is harder and will take longer. But generally, there is a very strong momentum towards accepting responsibility. In the end, it is all about accepting entrepreneurial responsibility for the people and the planet and not seeing yourself as a pure financial profit generator who doesn’t care about the damages one creates while generating profits.

What are the main costs and benefits of implementing ESG policies?

That is a complex question, because you can think of costs in purely financial terms, but also in terms of cultural costs, brand costs, and so on. If we first stick to the economic costs and benefits, using fully renewable electricity in most countries usually comes in 10 –20 % more costly than using fossil energy. But this is one of the few cases where you get higher costs if you choose to be sustainable. The majority of measures will actually save you costs. For example, if you choose LED lights to run your office, it is more sustainable and saves energy. The same is true for moving meetings online and travelling less.

By and large, most sustainability measures help to save costs. The only add-on that is really an incremental additional cost layer is the offsetting. If you don’t do it, it costs zero. If you do it, depending on the magnitude of your emissions, you will get high-quality offsetting at around 10–20 Euros per ton. Paying one or two Euros per ton is simply not enough, but also you don’t have to pay 100 Euros.

But to put things into perspective: At an investment company like Earlybird, with a couple of millions of OPEX a year, we emit a few hundred tons of CO2. That means we are talking about 4.000–8.000 Euros to compensate all emissions. Compared to millions of operating costs annually, that is not even 1%. It does depend on the business model, but most businesses should be able to absorb this incremental cost of offsetting.

“If you want to attract talents from generations X, Y and Z, you cannot ignore your ESG policies and your multidimensional ESG footprint.”

When it comes to the benefits, many measures automatically result in savings because they consume less resources. That can be energy, but it can also be other natural resources. On top of that, you can also think about ESG in a broader sense. We need to be mindful of the studies by the likes of McKinsey showing that smarter and more balanced decision-making originates in teams with high academic, cultural and gender diversity.

Last but not least, if you want to attract talents from generations X, Y and Z, who are much more mindful of the impact and role of a company in the ecosystem, you cannot ignore your ESG policies and your multidimensional ESG footprint. Otherwise, you will simply not be attractive to the best talent of the younger generations.

We think of ESG responsibility as our most important job at a personal and company level. The reason for this is that technology is in and of itself amoral, meaning it is not good or bad. It´s just powerful. And if you don’t immediately bring optimism or an attitude that technology will be oriented only towards the good, then it won´t happen automatically. So when we think about how to invest, we think about ESG first. 

Besides the fact that technology is amoral, there are two other reasons for thinking about ESG first. One is that we want to do this for a long time. We think that one of the best ways to drive returns in any asset class is to have a structure where you can stick around longer than everybody else.  

“The only way that we can do this for a long time is to be proud of what we are doing”

Warren Buffet is an amazing investor, but if you gave him $1 Million fifty years ago, he only became a billionaire in the last 20% of that, which speaks to the fact that longevity has a very big impact. For us as partners, the only way to do this for a long time is to be proud of what we are doing. And if you are not making the world a place that you are proud to live in, then you will churn out. You can´t do it long-term. 

The second reason for why we prioritize ESG is that we believe the world is moving towards rewarding value-centric businesses at a higher rate. Values can be a competitive weapon in the marketplace as more and more consumers want to be stakeholders in a company, they don’t just want to be shareholders or consumers. The information era has brought about a really sophisticated buyer who can look at something from all sides before spending their cash and their time. And they are thinking about it from all vectors as a human being and a participant in the market place. That’s why we think values can be a competitive weapon that will build longer-lasting businesses. 

How do you collaborate with founders on ESG?

There are a couple of things that we can do and that we think are important to do. One is at the hiring level, because one of the most important things in building a great company is of course to hire extremely well.  

When we help companies think about the criteria that they should be using and when we help them evaluate job requirements, one of the things we often put to them is this: “how do you make sure that the way that you’ve described this job requirement is not going to dissuade people from different demographics? How do you ensure that you can get enough women engineering candidates and how do you ensure that you get enough racial diversity in your talent pool?” So that is one of the standards that we want them to push you to adhere to. 

“How do you make sure that the way that you’ve described this job requirement is not going to dissuade people from different demographics?”

At the founder level we spend a lot of time thinking about that. We actually do less on the environmental and the sustainability front directly with the founder, but only because the types of founder that we optimise for are already founders that don´t just want to build a massive business, but also intuitively care about this issue.  

In our portfolio, we have some fashion ecommerce that leans towards rental and sustainability. We have some supply chain and logistic companies that lean towards the circular economy and reusable materials. We have hardware that leans towards consumption of less fossil fuel. Each time we make an investment in a given area, there is always a natural proclivity on the part of the founder towards ESG.  

From the perspective of a GP, how can LPs contribute more to the topic?

I think the two most important things that LPs can do is to show conviction and commitment. That means to be willing to be an early commitment to a manager, because when I am really invested in a founder, the relationship is much stronger. We are both mutually much more aligned, because if we both care about something a lot, then we are going to have a really great relationship. Conviction is number one. 

“If you can frame ESG in the context of conviction and commitment, then you will be effective and persuasive.”

And then commitment is number two, which is following through on your promises and sticking around through good times and bad. A lot of investors will promise to be supportive, but there will always be a bad quarter or a challenging investment or a market condition. And suddenly that investor has a lot of reasons for why they can´t commit anymore. That is a mild, but true breach of trust. And what that implies is thinking about ESG. If you can frame ESG in the context of conviction and commitment, then you will be effective and persuasive.  

If you can say: “I am explicitly trying to invest with managers that value ESG, can you put it in your diligence book?” If they put it in their diligence book and you commit early, you changed the industry. Now it is in their book and you impacted the trajectory of that firm by showing commitment. I think conviction and commitment is always the way to impact VCs the most and if you introduce ESG in the middle of that, then you will get your desired end. 

The extract below is from the interview with Ariana Thacker, Founding Partner at Conscience VC.

Previous interviews include: Kinga Stanislawska (Experior VC, European Women in VC),Miki Yokoyama (Tech Founders), Fabian Heilemann (Earlybird, Leaders For Climate Action), Kanyi Maqubela (Kindred Ventures), David Teten (Versatile VC)

—

What has motivated you to take a more impact-driven approach to investing?

Here’s the stigma a lot of VCs face – the words “venture capitalism” don’t exactly scream empathy to the general public. I’d like to change that, or, at least be a big part of that change.  

Investors who want to be seen as more than a human instrument enabling financial gain through an infusion of capital, can choose to diversify their portfolio among a plethora of emerging startups that really matter to them – companies that contribute to the greater good in their own unique ways, as well as provide real financial ROI.  

Most investors I know have causes they care deeply about and visions of a more sustainable, equitable, and socially conscious future. Personally, I think that comes naturally from those of us who have experienced first-hand the challenges presented by some form of a non-idyllic socio-economic background. A lot of people I meet today don’t realize how hard I fought to get to where I am. My parents (superheroes in their own way) worked hard…really hard to put their family’s needs above their own. We grew up humble, but happy. 

Education was always very important to me, and I’ve always had a deep passion for the sciences. To that end, I self-funded my Chemical Engineering degree from UCLA and became the first member of my family to graduate from college. Paying for a college education by myself and still graduating in 4 years was hard; studying for the entrance exams, doing the research about college choices, figuring out the application process, writing the essays, acquiring references, and getting on the Dean’s List each year – that was harder.  

Bringing an empathetic lens to investing is what has led Conscience to some of the most exciting, impact-driven, socially responsible, and financially promising companies in the marketplace. These companies are not only pioneering their industries into uncharted territories, they’re also perfectly reflective of Environmental, Social, and Governance (ESG) investing. 

How are you advancing diversity in venture capital?

I’ve carried a passion with me for supporting the self-starters and underdogs throughout my career as an engineer and investor. That drive to advocate for talented, but often-overlooked people have remained present in my most recent endeavor, which is the building of “Conscience,” an early-stage VC firm pioneering the intersection of consumer and science. 

I built Conscience as a one-woman-show from the ground up during the COVID-19 pandemic, which has been the most challenging but rewarding undertaking to date. Besides Conscience, among the spectrum of roles I’m most proud of is serving as the President of the Society of Women Engineers and the founding of a non-profit group—recognized by Congress—whose mission it was to advance women in STEM. 

Initiatives to advance underrepresented groups remain close to my heart and are reflected in my investments. In fact, over 50% of my personal and fund portfolio companies are led by female and diverse founders. This wasn’t a social initiative – the investments made were into the best-in-class founders, which naturally lent itself to a diverse portfolio.

Walk us through one of your portfolio companies aligned with ESG investing.

Nimbus is an outstanding example of ESG investing in the portfolio. They have produced a narrow-tilting vehicle that has the form factor of a motorcycle, but the safety features of a car. The company’s proprietary and patent-pending tilt technology has positioned itself as an urban transportation solution to congestion, parking, fuel consumption, and pollution.  

Nimbus has the ability to unlock expanded productivity gains from a segment of the population that could not previously afford reliable and efficient transportation. At a price point of $99/month to rent and $6,420 to buy for their base model, Nimbus will enable affordable transportation for the masses, as the cost of renting one of their vehicles is below or at the cost of monthly bus fare in several major cities, including New York, Seattle, Chicago, Los Angeles, and Miami. 

From a climate impact perspective, automobiles are one of the largest contributors to transportation-related carbon emissions, with trends showing greater emissions despite the increased presence of alternative fuel vehicles. Nimbus is estimated to be 3x as green as standard electric vehicles at 370 MPGe and requires less materials and batteries than traditional EVs. 

Nimbus vehicles are also 4x smaller than traditional cars, leading to tangible benefits in navigating through traffic and finding parking. They’re designed for city dwellers with a sleek and compact two-seat cabin, at half the width of a Smart Car, with plenty of room for storage. 

Nimbus is truly the future of urban mobility with powerful and impactful ripple effects in sustainability and accessibility. 

—

#ESGinVC

About Ariana Thacker
Ariana Thacker is the Founding Partner of Conscience VC, an early-stage fund pioneering the intersection of consumer and science. Ariana is a technical investor with a portfolio of 30+ companies alongside leading investors. She graduated with honors from UCLA in chemical engineering, with technical expertise spanning Fortune 500 companies to early-stage start-ups. She is a community leader for diversity, with tenure as President of Society of Women Engineers, Founder of congressionally-recognized philanthropic organization, and 50% of her portfolio allocated to diverse and female founders. 

About Marco Cesare Solinas
Marco is an Analyst at Blue Future Partners, where he is responsible for sourcing and analysing new investment opportunities. He is passionate about Technology and Venture Capital and making an impact with investments. He focuses on both direct and indirect investments.
Previously, he has built an international and multicultural background across Italy, US, Germany, Turkey and Malaysia. Marco holds a CEMS Master’s in International Management and a Bachelor´s in Economics and Finance from Bocconi University.
Linkedin — Twitter — Medium

About Blue Future Partners
Blue Future Partners is a Fund of Funds with decades worth of experience in investing in Venture Capital. We specialize in backing Emerging Managers focused on early-stage technology investments. We are people-centric and relationship-driven. We have a global mandate and existing relationships with Emerging Managers in the US, Europe, Israel, China and South East Asia.
Website — Linkedin — Twitter — Medium

The extract below is from the interview with Jake Gibson, Founding Partner at Better Tomorrow Ventures

Previous interviews include: Kinga Stanislawska (Experior VC, European Women in VC),Miki Yokoyama (Tech Founders), Fabian Heilemann (Earlybird, Leaders For Climate Action), Kanyi Maqubela (Kindred Ventures), David Teten (Versatile VC)

—

How do you address ESG responsibility at Better Tomorrow Ventures?

We have at least one LP with an impact focus, and so we fill out the B Impact Assessment each year and have our portfolio companies do it as well. However, as a new, small fund that invests primarily in new, small companies, there’s only so much we can do. So the real answer is that we believe financial services provide some of the biggest levers possible for improving human outcomes, and that’s where we focus. The companies we get the most excited about backing are ones where we can see a clear path to better access to financial products, and growing the global pie for everyone.

Do you have any conversations around ESG and positive impact with your portfolio companies?

We use the B Impact Assessment as a bit of a motivator to get companies thinking about their own impact, diversity of their teams, how well they take care of their employees and customers, etc. Beyond that, we don’t specifically talk about ESG initiatives, but we are always talking about impact.

“…we believe financial services provide some of the biggest levers possible for improving human outcomes, and that’s where we focus.”

Some examples of companies that we’ve invested in include bringing better financial services to audiences like truckers or farmers in the US, or small business owners in emerging markets. Similarly, we’ve backed companies bringing better, cheaper insurance products to underinsured markets like LatAm. So impact is always at the forefront. 

Have you talked about ESG with your LPs? What are their perspectives and how are they different from yours?

We’re pretty aligned. We have a number of LPs who invested in us because of the impact angle from financial services that I described. Even though we never market ourselves as an impact fund or ESG-focused, it’s clear from our portfolio that it’s something we pay attention to, and we have LPs who really appreciate that.

What needs to change for the VC industry to become more diverse and what are the most important actions each VC can implement here?

The industry is going to go wherever the money goes. VCs absolutely need to do a better job of investing in underrepresented founders, but at the same time, those founders are often building solutions for audiences that your average VC doesn’t understand. So we also need more underrepresented VCs.

“…ultimately a lot of the responsibility falls with LPs, who need to do a better job of backing underrepresented investors…”

This can mean that the VC industry needs to do a better job of hiring and training underrepresented investors, but that process can take a while and there’s not a lot of attrition at the partnership level of most VC firms that would free up decision-making seats for those new investors.

So ultimately a lot of the responsibility falls with LPs, who need to do a better job of backing underrepresented investors, who can back those founders and create whole new generations of great founders and great investors. 

—

#ESGinVC


About Jake Gibson
Jake is one of two founding partners of Better Tomorrow Ventures. Before BTV, Jake co-founded Nerdwallet, one of the original consumer Fintech companies. Without any outside funding, Jake helped Nerdwallet grow from 2 people into a world-class, mission-driven team, working to build the future of personal finance. Jake stepped down in early 2014 and since then, has used his experiences to help other entrepreneurs and small businesses in any way he can. 

About Better Tomorrow Ventures
BTV is a $75m fund that leads rounds in pre-seed and seed-stage fintech companies globally. They take a broad view on fintech, and many vertical SaaS and marketplace businesses fit in their purview too. BTV´s initial ticket is usually between $500k and $1.5M as a lead or co-lead investor in a pre-seed or seed round. 

About Marco Cesare Solinas
Marco is an Analyst at Blue Future Partners, where he is responsible for sourcing and analysing new investment opportunities. He is passionate about Technology and Venture Capital and making an impact with investments. He focuses on both direct and indirect investments. 
Previously, he has built an international and multicultural background across Italy, US, Germany, Turkey and Malaysia. Marco holds a CEMS Master’s in International Management and a Bachelor´s in Economics and Finance from Bocconi University. 
Linkedin — Twitter — Medium 

About Blue Future Partners
Blue Future Partners is a Fund of Funds with decades worth of experience in investing in Venture Capital. We specialize in backing Emerging Managers focused on early-stage technology investments. We are people-centric and relationship-driven. We have a global mandate and existing relationships with Emerging Managers in the US, Europe, Israel, China and South East Asia. 
Website — Linkedin — Twitter — Medium