By: Pratibha Vuppuluri, Managing Director, Global Portfolio and Investments, Unreasonable
Over the last few years, ethical investing has started to grow in popularity among the investment community. With solid returns and balancing purpose and profit, investors can focus their money on supporting ethical investments in important areas such as climate change. In fact a recent study found that ethical funds available to UK investors proved resilient during the pandemic, with the average ethical fund achieving over 4.3% growth over the last year compared with an average 1.5% loss from non-ethical propositions.
Traditionally many ethical fund managers have invested in organisations committed to making a positive impact through their environmental, social and governance (ESG) practices. ESG describes three factors to assess corporate behaviour. Environmental looks at their interaction with the environment, such as climate change, biodiversity, carbon emissions, air and water etc. Social looks at the impact on society and communities, including human rights, health and safety issues etc., whereas Governance focuses on how companies are governed. ESG practices are rated by assessing annual reports, media coverage, investment analytics and management data.
While ESG is a popular investment choice for people who want to balance purpose with profit, another option is emerging: Investing in climate change startups.
Why invest in climate change startups
We’re at such a critical juncture in our efforts to reduce global warming, as the world is still not on track to meet its goal of limiting global temperatures rising by 1.5C. But we have an opportunity to tackle the climate crisis by supporting those companies that can make the biggest difference.
From renewable energy to recycling and reducing plastic consumption to minimising food waste and so much more, climate change startups have developed ground-breaking and scalable solutions to help solve the climate crisis. Furthermore with COP26 coming up in late October / early November, a primary aim for governments and businesses is to harness the power of innovative startups to help them deliver on their goals. This puts startups right in the spotlight making them an attractive investment opportunity, particularly among younger generations who tend to opt for ethical and sustainable products and solutions. Also, as they have purpose baked into their model, investors need not worry about any potential ‘greenwashing’ i.e. misleading environmental claims.
In particular, high growth Series A / B VC backed technology startups offer solid returns for investors if you back a company with a strong and strategic vision, innovative ideas, cutting edge technology and a talented team. Take Goodr, a sustainable food surplus management platform that leverages blockchain technology to reduce food waste and combat hunger. They provide an end-to-end solution for businesses seeking to earn money from food waste. Goodr coordinates and facilitates the pickup and donation of organic recycling of excess food from large enterprises and venues, distributing it accordingly to communities in need, through non-profits. Goodr is an example of a strong investment opportunity, the CEO Jasmine Crowe has a clear vision with her innovative yet practical approach to reducing food waste, combined with a strong business model and great team supporting her. To date, they’ve raised a total of $2.9M in funding over six rounds. Notable investors include Backstage Capital, Emerson Collective and Capital One Ventures.
Benefits of a Manager Led Syndicate Platform
While there are simply millions of startups to choose from, it can be hard to know where to begin. Joining a manager led syndicate platform offers you a huge advantage, giving you access to a wide portfolio of growth stage climate change startups. By investing as part of a Syndicate Platform Venture (SPV), you can harness the knowledge and skills of the community of investors who are investing alongside you and participate in funding rounds led by top tier investors. You can also benefit from advisors and mentors running various investment masterclasses and workshops.
It’s an attractive proposition for those who have a passion to do good with their money but aren’t necessarily ethical investment experts.
Investing for the future
Investing in climate change startups is both a financially sound and morally important decision. By doing so, you are helping to advance innovative solutions that can tackle serious issues relating to the climate crisis and driving lasting and scalable change for everyone.
So, if you’re still deciding where to invest your money, remember that investing in climate change startups means you are not only investing in your future but also the future of our world and the future of humanity.