3 ESG myths VCs and startups need to snap out of …

3 ESG myths VCs and startups need to snap out of quickly

Environmental, social, and corporate governance (ESG) is a critical topic in the European startup ecosystem, often misunderstood and misrepresented. The misconceptions surrounding ESG include the belief that it equates to impact investing, which is a specialized asset class focusing on measurable social or environmental benefits alongside financial returns. However, ESG criteria are broader, influencing all investors practices across industries and company stages. They are essential for long-term financial performance and are becoming mandatory due to increasing regulations and stakeholder demands. Another misconception is that ESG is irrelevant for seed and early-stage startups. In reality, implementing ESG principles early on can lay a sustainable and ethical foundation for growth, avoiding future costs related to employee welfare, emissions control, and more. Prioritizing ESG also helps attract and retain top talent, particularly among younger demographics who value responsible companies. Furthermore, ESG is not a nice-to-have aspect but a must-have for companies. Investors are increasingly recognizing the importance of ESG practices in adapting to significant economic changes related to sustainability. The European funding landscape is shifting towards supporting sustainable ventures, demanding proof points from companies seeking follow-on funding. To address the knowledge gap and misconceptions about ESG, accessible processes and incentives are needed. Investors should understand the weight of ESG issues for the success of good ventures and how to communicate this effectively to early-stage companies. Ultimately, ESG will become a strategic imperative for businesses to thrive in a sustainable and responsible manner. Resources like the ESG for seed-stage startups guide, Antler Sustainability toolkit, and Balderton ESG toolkit can help startups build a solid ESG strategy. Pauliina Martikainen, partner at Maki.vc, and Mona Saurén, an analyst at Maki.vc, are responsible for overseeing Maki s ESG work, supporting portfolio companies in their ESG journey from forming policies to developing ESG strategy.

Source: thenextweb.com
Published on 2024-09-23

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