We were pleased to participate in theGlobal Corporate Venturing & Innovation Summitlast week, where we co-led an inaugural working group focused on ESG (Environmental, Social, and Governance) investing. In preparing for this, we benchmarked with our industrial Venture Capital and Corporate Venture Capital peers, observing ESG approaches ranging from non-existent to nascent. We heard consistent concerns over the lack of ESG standards and metrics, the applicability of any ESG metrics to digital technology/infrastructure companies, and the value of requiring ESG reporting for early-stage companies.
Unfortunately, most of these concerns seem to miss the point that investing is an impact sport. We invest in the future, not the present – betting that our companies will have an impact disproportionate to their size. While Venture Capital was built specifically to see and bet on this in terms of financial returns, it is uncharacteristically risk-averse when it comes to the triple-bottom-line of People, Planet, and Profit.
As a starting point for our own measurement, we tracked our 48 portfolio companies to theUN Sustainable Development Goals, a solid framework of ESG goals and targets. What we discovered surprised us, as many of our portfolio companies were already exerting great ESG Impact. SmartEx, as an example, has enabled textile manufacturers to save over 23 million liters of water, 1.8 million kWh of energy, and 459 tons of CO2 emissions. WasteHerohas halved municipal trash collection trips in several large cities, significantly reducing fuel usage and CO2 emissions. Pulse Industrialprevents steam trap failures which account for over 5% of a plant’s fuel and water treatment costs. Axino’score-temperature management solution for food retailers is so successful at reducing energy usage, labor, and food waste that one of their recent investors had to recalibrate their ESG metrics upward to accommodate Axino’s significant impact.
Bottom line, Digital Industry investing is impact investing, and there is no better time to start measuring that impact than now. We believe that the highest impact potential for ESG in the coming decade is at the intersection of digitalization and energy, manufacturing, smart spaces, and supply chain/transportation. This has been our sole focus for ten years, and we’re just getting started.
Momenta is the leading Digital Industry venture capital firm accelerating digital innovators across energy, manufacturing, smart spaces, and supply chain. Led by deep industry operators across its venture capital, strategic advisory, and executive search practices, Momenta has made over 50 investments with notable exits to SAP, PTC, and Husqvarna.