Corporate social responsibility. Sustainability. Responsible investing. ESG. The terminology has evolved over years but the principles remain the same. And, as Larry Fink, CEO of the largest asset manager in the world points out, if companies want to prosper over time, these principles are here to stay.
ESG is a broad term for socially and environmentally responsible investing and has become more than a trend or simply a checkbox for corporations and investors. According to KPMG, “Asset managers and asset owners see ESG and responsible investment as a smart way to achieve competitive advantage. As the younger generations become more active in the market, demographic shifts are creating a growing community of responsible investors.”1
ESG as a Core Business Value
At Moderne Ventures, we understand the major role that VC plays in supporting and growing new and innovative companies and we believe that it is critical to look for companies that have ESG at their core. We’re working diligently alongside our corporate partners to grow our portfolio with companies that are challenging the status quo and changing the way business is done.
Money Talks
In recent years, ESG investing has been outperforming any other forms of investing in the market. Last year, while most asset prices took a beating during the first half of the COVID-19 pandemic, ESG investments performed better than most.1 According to Moderne’s founder and Managing Partner, Constance Freedman, “we see so many opportunities for ESG investing in the real estate, finance and home service industries, and we are committed to helping our corporate partners realize the value in ESG, helping them to decrease both their carbon footprint and energy costs.”
A Sampling of Moderne’s ESG Innovators
Stagnancy in home building has not kept up with demand and population growth. This has contributed to a growing housing crisis. Traditional home building methods are inefficient and can be environmentally wasteful. ICON is reimagining the approach to homebuilding and construction to make affordable, sustainable, and dignified housing available to everyone throughout the world.
Kaiyo connects a love of great design with a greater love for our environment by keeping furniture out of landfills and in our homes for as long as possible.
Vyv is a new class of clean light technology that harnesses the antimicrobial power within the visible light spectrum. Vyv stops the growth and kills viruses, bacteria, fungi, yeast, mold and mildew. Vyv’s single diode offers all the benefits of LED lighting — sustainable energy-efficient operation; extended lifetime to reduce waste; and precise color spectrum tuning—while maintaining its intensive antimicrobial properties. Vyv has also just been proven to deactivate the SARS-Cov-2 virus (commonly known as Coronavirus).
Piñata is the first company of its kind - a reward and incentive program for renters. Piñata users earn rewards every time they pay their rent and build their credit history in the process. Piñata also offers a rent relief program where users can nominate potential recipients who are struggling to make their rent payments—amazing people who just deserve a break.
Trash Butler is a sustainability expert and door-step trash, recycling and package delivery solution for multi-family residences.
ESG covers a range of issues that are important to today’s investors. From the global climate crisis to the COVID-19 pandemic and issues around social justice. Investors want to know details about how companies manage their carbon footprint. How committed are they to diversity in hiring and promotion? What types of contributions do they make to their communities? All of these factors can be major contributors to a company’s long-term success as well as to long-term value for shareholders. In short, what’s good for the environment and the community can also be good for investors.
Why Now?
So while the ESG message is being heard loud and clear in the industry, it is also being heard by a new – and growing - generation of investors themselves. Today millennials and Gen Z employees make up about 38% of the workforce – that will grow to 58% within the next decade. For millennials, societal impact and ethics are the most common reasons why they change their relationships with businesses. 2
ESG by the Numbers
While most asset prices took a beating during the first half of the COVID-19 pandemic, ESG investments performed better than most. 1
ESG funds captured $51.1 billion of net new money from investors in 2020, a record and more than double the prior year. 1
$30tn globally, sustainable investing assets in the five major markets, representing a 34% increase in two years. 4
71% of CEOs feel it is their personal responsibility to ensure that the organization’s environmental, social and governance (ESG) policies reflect the values of their customers. 4
76% of global CEOs recently interviewed by KPMG say that their organization’s growth will depend on their ability to navigate the shift to a low-carbon, clean technology economy.4
In 2020, 71 sustainable funds were launched, easily topping the previous high-water mark of 44 set in 2017. At least 30 funds have been launched each year from 2016 to 2020. 1
63% of sustainable funds performed in the top half of their respective categories in 2018. 1
Sustainable funds attracted a record $51.1 billion in net flows in 2020, more than twice the previous record set in 2019. Sustainable fund flows accounted for nearly one fourth of overall flows into funds in the U.S. 1
Here to Stay
ESG investing is here to stay and the market for ESG investments continues to grow—with some experts projecting that it could be a $1 trillion dollar category by 2030.5 With this, the pressure for asset managers to truly embrace sustainability and clearly reflect it in their portfolios will continue to grow as well. At Moderne Ventures, we’re ready to meet the challenge and look forward to the ways in which we can invest in the future.
Sources
1 Morningstar – Sustainable Funds US Landscape Report, February, 2021
3Deloitte Global Millennial Survey, 2019
3 SP Global Market Intelligence, April 6, 2021
4 KPMG: The Numbers that are Changing the World – Revealing the Growing Appetite for Responsible Investing
