Venture capital investor OneVentures is sharpening its focus on ESG (environmental, social, governance) principles in the startups it invests in to drive change in the sector.
Managing director Dr Michelle Deaker, said it’s time for Australian VC firms to align their investment strategies to responsible investment practices and recognise that where they put their moment should have an impact that delivers a greater good.
“OneVentures has always had strong sense of purpose around societal benefit through our investments. We not only want to be investing in companies that solve large unmet market needs with potential for significant upside, but for that principle of responsible investment to be formally embedded into our screening and decision-making processes,” she said.
“ESG considerations will soon be a given for the venture capital sector in Australia, with acceleration underway in many markets internationally. That is why at OneVentures we’ve gone beyond ESG to the next step of alignment to UN Sustainable Development Goals, a measure which we apply to our portfolios.
“The public already expects it, institutional investors will demand it, and startups will look for it in their VC partners.”
While impact investment is not new in venture capital, a focus on ESG as part of the investment strategy is still nascent, with only around 11% of US VC firms investing through an ESG lens. But it is a rapidly growing trend with ESG funds reportedly doubling their funding to US$51.1 billion last year.
Under the new OneVentures policy, the firm will apply both positive and negative investment screening, reviewing the performance metrics of the companies they’re looking to back when it comes to ESG outcomes.
The focus will see the specialist VC firm actively select healthcare and technology companies considered to have a positive social and economic impact.
Dr Deaker said OneVentures will also bring a sharper focus to helping portfolio companies meet the highest possible ESG standards, including embedding key ESG requirements into term sheets and investment documentation, building reporting frameworks for companies, and requiring oversight within company boards.
“We know too that responsible investing is smart investing. Based on our experience, new ventures that are focused on a clear purpose, have strong governance, diversity principles and that are able to demonstrate a positive impact through their activity typically perform better financially,” she said.
OneVentures has more than $550 million in funds under management and has deployed about $280m in 28 early-stage and growth-stage companies since launching its first fund — the OneVentures Innovation Fund I — in 2010.
One of the best performing startups in its portfolio is Vaxxas, a medtech venture that’s replacing vaccinations syringes with a micro-array patch that could even be used for self-injection. The patch is simple to apply, removes cold storage requirements, which is critical for the third world but a major cost in supply chains and offers dose sparing, which means more vaccinations for the same quantity of vaccine.
“Vaxxas is one of many game-changing technology companies in our portfolios that improve patient outcomes and clinical care, and otherwise enhance the quality of people’s lives,” Dr Deaker said.
On top of VC investment, OneVentures also has a separate venture-credit fund, which lends to high-growth, early-stage businesses that would find it difficult to borrow from traditional lending sources.
The new ESG policy will also apply to future lending from the credit fund.