How to implement ESG reporting for your Venture Capital?

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ESG (Environmental, Social, and Governance) investing and reporting is on the rise. Companies that want strong access to investments and improved relationships with their existing investors need to take their ESG reporting to the next level.

What is ESG Reporting?

ESG reporting is the disclosure of data associated with a business’s impact and added value to three main pillar areas: environment, social, and governance. While companies produce financial reports to measure profits, investment performance, IRR, and costs, they also report on particular ESG metrics to demonstrate how their business values and channels empathize with the three mentioned pillar areas.

Environment entails climate change and greenhouse gas (GHG) emissions, cleantech, packaging waste, natural resources, land use, pollution, water quality, energy efficiency, biodiversity, and more.
Social entails customer satisfaction, product liability, health standards, chemical safety, gender, diversity, anti-racism, employee engagement and satisfaction, community relationships, human rights, and privacy.
Governance entails a board’s composition and diversity, business ethics, tax transparency, corruption, executive compensation, political contributions, and more.

Why ESG Reporting matters?

For investors, ESG reporting is important as it enables VCs to engage with Limited Partners, and comply with evolving regulatory requirements:

Regulatory and Compliance Requirements: ESG reporting is increasingly being mandated or encouraged by regulatory bodies and industry associations. VC investors need to stay compliant with these requirements to avoid legal and reputational risks. For example, compliance with the SFDR has become a priority for EU-based venture investors.
Alignment with Stakeholders: ESG reporting enables VC investors to align their investments with the values and expectations of their stakeholders. Limited partners, institutional investors, and increasingly, individual investors, are demanding greater transparency and accountability regarding ESG factors. By considering and supporting companies with robust ESG practices, VC investors can meet these expectations and build trust with their stakeholders.

Meanwhile, startups that embrace ESG reporting demonstrate their commitment to responsible business practices, which can lead to enhanced competitive advantages, growth, and positive impact.

Learn more about ESG Reporting’s frameworks, challenges and approaches for Venture Investors in our white paper here.

Read Rundit ESG white paper

Solution to ESG Reporting

Rundit is a portfolio management and monitoring software that helps Venture capitals monitor and keep track of portfolio performance, including ESG performance. The platform allows investors to collect performance data from different companies, whether those KPIs are for marketing, finance, or ESG.

Examples of those KPIs include:

Team Member Demographics: This metric includes gender, diversity of nationalities, and age information about a portfolio company’s team members and management.
Company Waste: This includes the amount of waste produced per product, and the amount (%) of recycled material used per product.
Job Creation: This metric refers to the number of jobs created by the portfolio company.
Employee turnover: This refers to the number of employees lost each month, which speaks to employee engagement and satisfaction.
Wages: Wages for female and male employees, a metric used by many companies to address the gender wage gap.

*Rundit allows investors to customize metrics and KPIs for different companies, whether those metrics are for marketing, finance, or ESG.*

After portfolio company report to their investors, Rundit will aggregate all the data and display it in visual dashboards which give investors a better overview of how those companies are doing.

Conclusion

ESG reporting holds significant importance for both venture capital investors and startups. For venture capital investors, ESG reporting allows for effective risk mitigation by considering environmental, social, and governance factors in investment decisions, while also aligning with stakeholder expectations and attracting socially responsible capital. On the other hand, startups benefit from ESG reporting as it helps attract investment capital, gain a competitive advantage, and promote long-term sustainability.

Ready to streamline and simplify your ESG reporting process? Let Rundit assist you.