ESG Report 2024: Responsible Investing at 3one4 Capital

At 3one4 Capital, we act proactively, support early standard-setting, and invest in durable technological assets that will solve for the needs of the future. This lends momentum to our philosophy of building long-term oriented positions in disruptive, category-creating, home-grown startups that will define the new era of India’s growth story in ways that are sustainable, inclusive, and resonant with India’s unique opportunities and contexts.

3one4 Capital’s ESG Report 2024 documents our commitment to implementing ESG principles across the firm’s functions, focus areas, and portfolio span. We have found that alignment with ESG parameters from the early stage ensures that we incentivise the promotion of technology that is durable, inclusive, and seminally consequential for scores of Indians.

ESG in the Early Stage

Early-stage investors play a critical role in shaping a company's ESG values, but current frameworks are designed for mature firms. Challenges in measuring impact and navigating reporting further complicate matters. Despite ongoing debate about ESG's effectiveness, responsible investing is essential.? The Doughnut Framework, which emphasises social well-being within ecological boundaries, is proposed as a guiding model for Indian investors seeking sustainable growth.

3one4 Capital’s Theory of Change

3one4 Capital outlines its Theory of Change, highlighting its commitment to partnering with mission-driven, early-stage companies. The firm uses a pragmatic deep-involvement model grounded in consumer behavioural patterns taps into non-traditional growth paths to help founders on the path to market leadership. The rapid transformation we witness demands a firm foundation of core values. These guiding principles ensure our actions and decisions consistently support our mission. Our Theory of Change (TOC) is directly built upon these values and organizational objectives, ensuring every step we take contributes to positive and lasting impact.

These principles, when integrated into 3one4 Capital’s investment and management strategies, equip the firm to support founding teams more effectively.?

3one4 Capital’s ESG Approach

3one4 Capital embeds ESG principles both within its operations and in its engagement with portfolio companies, treating it as a continuum of sustainable practices rather than a binary. The firm enforces compliance and regulatory standards, while also institutionalising ESG practices across its investments. ESG for 3one4 Capital involves operational practices established in partnership with invested companies, covering areas like product design, data privacy, supply chain management, workplace culture, and environmental practices, tailored to each company's unique context.?

Impact, though distinct from ESG, measures the positive socio-economic and environmental outcomes of portfolio companies' activities, with a focus on measurable, quantifiable, and intentional impact aligned with the SDGs. 3one4 Capital integrates ESG across all operations and investments, encouraging portfolio companies to identify and align with impact objectives from the outset. The firm's commitment to ESG and transparent disclosures has earned it recognition as India’s first venture capital signatory to the United Nations Principles for Responsible Investment (PRI) and high ranking for ESG transparency by Preqin.

3one4 Capital's portfolio demonstrates significant impact across industries, marked by environmental conservation, generation of employment opportunities, financial inclusion, and expansion of healthcare accessibility in numerous communities, all while accommodating a diverse range of linguistic needs, showcasing a commitment to both social responsibility and environmental stewardship.

Investments and Deal Selection

3one4 Capital evaluates 7,000+ investment opportunities on an annual basis, with a large number of those aimed at building ESG-compliant and SDG-aligned solutions for an aspirational India.

Through case studies of portfolio companies like Dozee, Licious, and Yulu, the report illustrates the tangible impacts of focusing on sustainable growth, from improving healthcare outcomes with technology to setting sustainability benchmarks in the food industry and promoting electric vehicle adoption.

Early Stage ESG Score

The report introduces a novel Early Stage ESG Score (ES2), designed to evaluate and quantify ESG performance at the pre-investment stage, demonstrating the firm's innovative approach to integrating ESG considerations into valuation processes. The report also delves into 3one4 Capital's thematic investment thesis on climate tech and digital public goods, emphasising India's role in the global transition to sustainable and digital economies.

Core Principles for Democratised Digital Public Goods

The COVID-19 pandemic accelerated the adoption of digital technologies, reshaping critical services such as healthcare, education, and government communications. The report introduces "techno-citizenship," a modern social contract granting citizens state protection and digital services, necessitating secure management of digital identities. It outlines five core principles for a democratised Digital Public Goods (DPG) system to support this framework.

1. Universal and equitable access to ensure no community is left behind.
2. Active inclusion policy with a philosophy aimed at reducing costs and friction.
3. Inviolable rights such as personal safety and privacy, ensuring control over personal data and the ability to opt out of data collection and profiling.
4. Legal recourse for digital rights abuses, which should only be available within the citizen or resident's home country to ensure proper legal protection.
5. Continuous innovation is necessary for the platforms supporting these systems to evolve and remain effective.

Finally, the firm's contributions to policy development and its perspective on India's sustainable growth trajectory are outlined, underlining the crucial role of technology and startups in driving India towards becoming a $10 trillion GDP economy. This comprehensive approach reflects 3one4 Capital's belief in extending its mission beyond financial returns to encompass societal benefit and environmental stewardship.

Download the Report