FiBAN Monthly: Consider ESG early for fundraising, attracting talent, and more sustainable growth

February 07, 2023

For idea- and early-stage startups, the concept of Environmental, Social, and Governance (ESG) may not seem much of a concern. After all, there are no compliance requirements. As a founder or angel investor, why bother?

You may have heard of ESG mostly in the context of stock markets, corporations, and large companies, and the topic may seem far removed from the world of startups. However, according to a recent World Economic Forum (WEF) survey, 68% of startups from WEF communities have been considering ESG since their inception, mainly due to customer, employee, and investor expectations.

“ESG is no longer a side-track; it is becoming mainstream and must be integrated into strategy. There are various ways to approach ESG, many of which have already been tested. Even if one doesn’t have all the answers, it is essential to recognize challenges, make a decision, and take the first step.”

– Annukka Mickelsson, FiBAN angel investor and board member

While some startups have been adopting ESG practices in silence, many accelerators and venture capital firms (VC) have been a bit louder about the topic. Lately, we’ve seen a growing number of companies posting about their own ESG efforts and reports, reflecting investors’ increased attention accelerated by the EU sustainable finance disclosure rules.

Many startups raising venture capital these days are finding ESG included in their term sheets, from public examples have a look at Cherry Ventures asking startups to adopt ESG reporting within 6 months of the investment. In Finland, according to TESI’s latest study, as many as 94% of VCs have sustainability integrated into their strategy, and 97% have set sustainability targets.

Other forms of financing, including banks, already require or are about to start requiring ESG at the early stages. And if a startup successfully navigates all stages leading up to an exit, ESG is among expectations, in some cases a requirement already.

A recent KPMG study among mostly European dealmakers revealed that 4 out of 5 take ESG into account during their M&A processes already, and more than two-thirds of them would be willing to pay a premium for high ESG performance. Not to mention if a company goes public, then it becomes subject to detailed ESG screening by rating companies.”

– Elina Kamppi, Sustainability Specialist at KPMG

FiBAN coverage of ESG will continue. In the meanwhile, if you would like to learn more, consider joining the upcoming EBAN Impact Summit in Barcelona on February 16-17, 2023. The event is free to attend, topics include ESG best practices, impact investing, EU impact finance outlook, among others and you get to meet Annukka and Tomas as well. You can register here

About Tomas Novotny

Tomas Novotny was the founder and CEO of indoor environmental analytics company 720 Degrees, where he raised several funding rounds; the company was acquired recently. Currently, he is a FiBAN member and an advisor to several startups, including climate tool Kausal, property configuration platform Propster, and 1455AI, an AI tool that assisted with the article; also a mentor and advisor to founders and investors at FiBAN, Pi Labs, and Courage Ventures.

Also, see the FiBAN impact investing toolbox.

Interested in further developing FiBAN’s ESG approach? Contact

Milja Mäkelä
Communications Manager, FiBAN