TLDR:
– Venture capital funds and startups are focusing on ESG to drive better performance in private markets.
– Three key principles identified to ‘do ESG well’ include clear definition, material action over reporting, and integrating ESG across the company.
In public markets, ESG has become ambiguous and misguided, with ESG ratings causing confusion and reporting taking precedence over actual improvements in companies. However, in private markets, venture capital investors are taking a different approach. VentureESG has worked with numerous funds and limited partners to establish three principles for successful ESG implementation in private markets. These principles include having a clear definition of ESG, prioritizing material action over reporting, and integrating ESG practices throughout the company rather than keeping it isolated.
This approach highlights the importance of understanding ESG as a company-specific concept rather than a generic term. Additionally, the article emphasizes the financial impact of ESG considerations, encouraging investors and companies to conduct materiality assessments to define their ESG goals. Moreover, the article suggests that ESG should not be confined to compliance or legal departments but should be integrated into the overall operations of the company to ensure a holistic approach to sustainability.
By reclaiming the ESG narrative in venture capital and emphasizing the importance of substantive reasons over branding, the article calls on investors and companies to unite in integrating ESG principles and tools for long-term financial success. Ultimately, the goal is to reclaim the narrative surrounding ESG and promote sustainable investing practices across the private markets.
