Effective ESG strategy is crucial to lasting success

• KfW Capital and BCG publish a report on the importance of ESG (Environmental, Social, and Corporate Governance) for VC funds and start-ups
• A survey reveals significant discrepancy in how VC funds and start-ups view ESG
• Three fourths of VC funds and two thirds of start-ups believe that ESG provides lasting added value

KfW Capital and Boston Consulting Group have conducted a joint survey on ESG (Environmental, Social and Corporate Governance) among venture capital (VC) funds and start-ups, the results of which have now been published in the report entitled ‘Growing the Seeds of ESG: Venture Capital, Start-Ups and the Need for Sustainability’. The report, which was supported by the Federal Association of German Start-ups, focuses on analysing how and to what degree ESG is already mainstreamed in the VC and start-up ecosystem.

Seventy per cent of the 76 VC funds surveyed for the report indicated that they had already introduced an ESG strategy. Only one third of the 109 surveyed start-ups, however, reported having implemented a corresponding strategy. This clear discrepancy is also reflected in how they view the impact of an ESG strategy on business development. Three fourths of the surveyed VC funds believe ESG will provide lasting added value for their business activity. Only around two thirds of start-ups are currently convinced that the topic represents added value. The survey covered 76 European VC funds and 109 start-ups.

“We see a discrepancy in how VCs and start-ups view the importance of ESG, and that is surprising for us as well. What we urgently need is a common understanding of this fundamental topic”, said Oliver Dany, Senior Partner and finance expert at Boston Consulting Group.

“The only way to achieve lasting success at VC and start-up level in the future is to have a robust ESG strategy whose implementation is regularly monitored and reported. Otherwise it will become increasingly difficult to attract institutional investors, family offices or public capital providers in particular. We also see a particular need for optimisation in communication”, said Dr Jörg Goschin, Senior Managing Director of KfW Capital. Only 36% of the traditional VC funds reported maintaining a regular dialogue on ESG with their portfolio companies, while all other start-ups have so far been approached on the topic only sporadically or not at all by their VC funds.

As expected, the surveyed impact funds (22% of the surveyed funds) exhibited a different picture. Nearly 90% of impact funds reported maintaining a regular dialogue on ESG with their portfolio companies, while 10% speak about this with their portfolio companies at least irregularly.

Note:

You can find further results of the non-representative survey in the full report entitled ‘Growing the Seeds of ESG: Venture Capital, Start-Ups and the Need for Sustainability’ at: KFW Capital (kfw-capital.de) (news)
In the second part of the report KfW Capital and BCG present a jointly developed ESG approach which start-ups, VC funds and LPs can use as a starting point for further considerations on integrating ESG into their processes. If you have further questions
KfW Capital, Sonja Höpfner, Public Relations Officer: +49(0)69-7431-4306
Boston Consulting Group, Shara Fatheyan, Senior Media Relations Coordinator, 0170 334 3647

KfW Capital
KfW Capital is KfW’s venture capital subsidiary and invests in European venture capital funds. The aim of KfW Capital is to sustainably bolster the VC fund landscape so as to give innovative technology companies in Germany better access to growth capital. To this end KfW Capital invests on the same terms as private investors under both the ‘ERP VC Fund Investments Programme’ and the ‘ERP/Future Fund Growth Facility’. The VC funds for their part commit to investing at least the amount of capital brought in by KfW Capital into German high-growth enterprises. In its investments KfW Capital applies the Sustainability Policy and the exclusion list of KfW Capital. The fund investor sets great store by the target funds’ observance of ESG criteria. Further information on KfW Capital, the programmes and KfW Capital’s VC portfolio is available at www.kfw-capital.de.

About BCG
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