Introduction to ESG at VC Fund Operations

Introduction to ESG at VC Fund Operations

Hannah Leach

ESG and VC specialist

How can a VC fund begin their ESG journey? Well, by reviewing and improving their own fund operations. Join Hannah Leach as she explores how VCs can get started.

How can a VC fund begin their ESG journey? Well, by reviewing and improving their own fund operations. Join Hannah Leach as she explores how VCs can get started.

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This video is now available for free. It is also part of a premium, accredited video course. Speak to an expert today to watch more.

Introduction to ESG at VC Fund Operations

6 mins 30 secs

Overview

In the investment world, ESG is typically viewed within the context of the investment process e.g. how VC funds can integrate ESG into screening, due diligence and ongoing portfolio management. More important is how ESG applies to a fund’s own internal operations. This area has been neglected, firstly, because it is complicated to make the direct link between fund-level ESG operational integration and revenue, secondly, it would require changing entrenched and familiar behaviours (e.g. lack of diversity and governance). The first step for a VC fund is to craft an overarching ESG policy. The policy should be framed internally through consultation with a cross-section of key stakeholders and include an exclusion policy. Lastly, the policy should also cover how ESG is operationalised at a firm-level.

Key learning objectives:

  • Understand why internal operations have been neglected in ESG integration

  • Understand how to craft an ESG policy

Now free to watch

This video is now available for free. It is also part of a premium, accredited video course. Speak to an expert today to watch more.

Summary

Why have internal operations typically been neglected? 

This area has been neglected, firstly, because it is complicated to make the direct link between fund-level ESG operational integration and revenue, secondly, it would require changing  entrenched and familiar behaviours (e.g. lack of diversity and governance). Founders want to feel represented and understood by their investors, leading to examples of underrepresented founders looking for investors that have diversity in their team. 

How can you craft an ESG policy? 

The ESG policy must set the tone across the fund, tie ESG to strategy and ensure that there is both focus and ownership. The policy should cover a fund’s approach to ESG, starting with their own clear definition of it.

This definition should cover all elements of E, S and G and should be informed by industry best-practice and existing standards/guidelines (e.g. the PRI).

It’s important for ESG to be framed internally through consultation with a cross-section of key stakeholders within the fund and include an exclusion list of industries and business models in which the fund will not invest, as well as an outline of how ESG is integrated across the end-to-end investment process. Lastly, the policy should also cover how ESG is operationalised at a firm-level.

Now free to watch

This video is now available for free. It is also part of a premium, accredited video course. Speak to an expert today to watch more.

Hannah Leach

Hannah Leach

Hannah Leach is a partner at the venture firm Houghton Street Ventures and co-founder of VentureESG, a global non-profit initiative whose aim is to drive forward the adoption of ESG practices in the venture capital industry. VentureESG provides VC funds with the knowledge, tools and peer support to be able to implement more robust ESG practices across their operations and end-to-end investment process. Hannah started her career in international development and has since spent the majority of the last decade working with companies to design and launch new products and services.

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