Venture capital

Most venture capital (VC) firms lend themselves to be understood as impact and/or thematic. However, we often see that venture capital firms – unknowingly – fail to translate their responsible investing efforts to a format that meets the requirements of their stakeholders.

Responsible investing within venture capital differs from mainstream private equity ESG approaches and leans more towards impact. We have observed several, mostly northwest European VC firms, making strides in creating their own ESG frameworks or embracing the Sustainable Development Goals as a framework to measure and report impact. The ones that are considered best in their class have adopted a mix of ESG and impact frameworks.

We can aid venture capital firms in tailoring their responsible investment approach to their specific strategies and investment process. We help in defining ESG standards to the early-stage and likely technology-heavy characteristics of investments. We formulate our approach to fit your shareholder position. Our services span across the entire investment process and we offer a wide range of products that enable comprehensive ESG and impact integration:

Integrate ESG into your investment strategy and positioning

The importance of responsible investment practices within Alternatives is on the rise. Investment firms recognise the need to create and implement a robust ESG policy and process, but few have the resources and skills required to do this. Integrating ESG into an investment strategy, in such a way that it truly delivers on the value-creation opportunities in their portfolio and pipeline, is a huge challenge.

But we can help.

Our experienced consultants can assess your ESG exposure and determine how relevant factors might impact your current and potential portfolio. Leveraging this knowledge, we can help you design your particular ESG approach fitted to your investment strategy and processes that will not only satisfy the most demanding stakeholder but will also identify undetected risks and capture the most potent opportunities for value creation. We can provide you with the right amount of customisation, helping you develop and deliver the very best ESG strategy for your needs with the benefit of our years of experience.

Create an ESG policy true to your objectives, enhanced by our experience and best practice

Without a robust ESG investment policy, institutions leave themselves open to all manner of investment and reputational risks. A bespoke policy based purely on your specific return and deployment objectives may feel like a better fit, but it can suffer from being too narrow, focused on your own institution’s past successes and failures; thus missing the opportunity to draw on a larger body of experience, across the asset class, and beyond.

In a joint effort with your team and your key stakeholders, our consultants will adapt our best practice ESG policy models to match your requirements. We consider the risk appetite and tolerances of your stakeholders while addressing specific investment strategies in your chosen areas of focus.

The result is a policy that helps you identify risks and opportunities before investment and provides the information and tools to manage the existing risks, and those that may yet appear, in your portfolio.

Invest with greater conviction, knowing that your ESG exposure is quantified and manageable

Whilst significant impact from both a risk management and value creation perspective can be made post-investment, high quality due diligence can help focus resources on the right deals, preparing the way for impactful transformation.

ESG issues can be difficult for generalists to identify and evaluate. Even if traditional due diligence approaches may spot, if not wholly understand, some risks, they are much less likely to discover the value-creation triggers in any given business from ESG.

We conduct ESG risk assessments to uncover red flags and identify value-creation opportunities. We build a model for each of your potential investments that considers how the industries will likely evolve, from a sustainability perspective, and evaluate how well each company will likely perform in that new environment.
The result for you is a portfolio that has been significantly de-risked prior to investment and which is better prepared to thrive long term.

Substantiate your ESG credentials, whilst identifying risks and value creation opportunities as soon as they arise.

As resources of company management of most start-ups are restrained, we developed a tailored approach that requires limited time and effort from the companies.

We apply a standard four-step approach to assess the ESG exposure and performance of portfolio companies, identify KPIs and develop value creation roadmaps:

1. Long-term vision

First, we look at the relevance of ESG in the company’s industry and create a long-term vision on where this industry is moving

2. ESG materiality

Using our ESG framework, we create an industry heatmap, highlighting the frictions between operations in the supply chain and a sustainable future

3. Company performance

We assess the company’s performance on material ESG issues based on desk research, and, if relevant, discussion with management

4, Objectives & KPIs

We identify opportunities for improvement, set objectives, and KPIs, and develop a strategic roadmap – we monitor progress annually

We challenge fast-growing companies on potential ESG-related risks, and we support them to leverage ESG-related commercial potential.

With our help, you will be able to give your stakeholders what they want – not just accurate ESG reporting, but improved performance, owing to your ability to act sooner when value creation opportunities arise through ESG management.

Use our award-winning reports to provide transparency whilst complying with relevant regulatory standards

The vast array of different reporting obligations, on various ESG issues, can be overwhelming as an investment firm, especially if you are an early-stage investor focusing on start-ups or scale-ups.

To comply with the most demanding stakeholders, we have developed a proprietary framework that is compatible with international industry standards, including UN PRI, SASB, SDGs, and TCFD. Our award-winning reporting tools provide indications of both risks and opportunities in your portfolio. Our report includes the information needed to satisfy your stakeholders, but we aim not to create extensive output. The process per company assessment is pragmatic, efficient, and focused on output and results. Specifically, we aim to develop a one-pager per company and aggregate these insights into a portfolio report.

We can help you determine your reporting needs and support you in the reporting process. We have a state-of-the-art online data platform in place, SpringIQ, which facilitates the data gathering phase for your portfolio companies and have all the required reporting systems to provide you with comprehensive ESG reports.

Enlighten your investment managers on portfolio best practices, regulatory developments, and value creation

The landscape of ESG is constantly moving and developing rapidly. and so is the relevance of it to your investment practices.

Having been in the field for 10 years, we have seen the picture change. Our interaction with and reviews of thousands of companies over the years have sculpted MJ Hudson Spring’s expertise. We have highlighted many ESG related risks and opportunities that should be considered at the top of the agendas of senior management. We have helped our clients create value from these findings by reducing risks, reaping cost saving potential, and rethinking propositions and business models.

We can help to train your investment managers and analysts to consider an ESG lens in their decision-making and to recognise the practical applications of ESG faster. Incorporating ESG into daily decision-making will ready your investment firm for the sustainable future of finance.

related services