Are VCs for good or just in it for the $ at any cost?

?? In the immortal words of Dickens,

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness".

These words ring loud and true for the period we live through.

?? Climate Crisis, War, Pandemic, Equality, Financial stress, Employment, Education, Health care, the list of issues encompassing us all goes on and on.

As we deal with these at different levels, there is something that drives us forward, and that is hope ???? that this time we will use our wisdom, science and technology to make things right. BUT with all that said, it will only if there is lots of money?? to be made.?

?? So what does "good" mean in the context of VCs for good? At its core, a VC invests in Startups that it believes will shape our future, and they certainly do. Good has been directly correlated to financial returns, and of all the IPOs over the last 25 years, Venture-Backed companies form 70% of the market capitalisation. But in the context of today, "GOOD" needs to mean an awful lot more.?

The Elephant ?? in the room.

?? We are in a climate crisis. It is no longer a debate; it is a scientific fact. But even with the physical evidence we witness worldwide, the obsession with only financial returns continues.

? For most funds, not including the ones set up expressly to deal with the crisis, there seems to be a lot of greenwashing, reporting ESGs related numbers as a pick n mix selection of convenience.?

What is happening at the early stage?

?? We have witnessed a huge increase of Impact funds emerge and money being poured into climate tech. Still, it should not be down to a group which also needs to prove the financial return viability of opportunities to be responsible for investing in tech to solve for the rest of us. All investors and startups need to do the right things, even if their focus is not specifically on climate tech. Being conscious of sustainable development goals and implementing the right solution from the onset is paramount to saving our way of existing on the planet.

?? Unfortunately, it seems the drivers are the wrong way around and make money at any cost (unconscious or conscious choice). But mark me when I say if this is not resolved at the startup and capital allocation level, legislation and regulation will make everyone implement change. Which, as we know, will be a lot more time-consuming and expensive at a later stage, so best to get ahead of the curve.

?? 2021 saw VCs invest $40b into Climate tech startups, although the verticals are pretty blurred and there is some serious greenwashing, it still seems that the financial drivers are dictating the flow of capital. 90% of the invested capital went into three sectors, Mobility, Energy, Food & Water, so we can see that EV manufacturers drove the investments.

?? 64 new climate funds launched in 2021 with $37b of fresh dry powder ready to invest into climate tech.?

Impact analysis:

? Only 25% of recent climate technology investment between 2013 and 2021 was allocated to the top five areas representing over 80% of future emissions reduction potential by 2050.

? To give this some context VCs have bet big on crypto startups in 2021, investing over $30 billion globally across more than 1300 deals.?

Rather than solving the problem, technology amplifies intent. Even though climate tech does not hold the answer to the global warming crisis, it is emerging rapidly as a critical mechanism to keep emissions down and achieve the 1.5°C target.

So what can VCs do:

? Implement ESGs at a VC level. This does not mean having to become a B Corp or seeking international regulatory licences, but rather starting by doing the right things.

? View ESGs from a helicopter and not in isolation to suit a message.?

?? All VCs have to take the responsibility to educate and instil the correct business models aligned with sustainability from the get-go and stop any greenwashing BS.

?? If you're creating surface-level environmental and social initiatives, your company is likely greenwashing, simply fake activism.

? Making environmental "good" a prerequisite for investing does not mean that it is firm and fixed but rather an obligation of VCs to do good by steering and educating founders to do the right thing. Creating regenerative, rather than extractive, businesses with positive environmental and social impact.

?? A brand's or business's responsibility extends beyond social media posts and donations. Unless you take a truly integrated approach to ESG, consumers will know, damaging your company's reputation, investor appeal, and bottom line.?

The world is moving fast, so get ahead before it is too late for portfolio companies or funds to pivot to what is inevitably coming ????.