The purpose of this policy is to articulate our ideas and approach to implementing Environmental, Social and Governance (ESG) considerations in our investment process and our operations. In essence, we believe that by fully integrating ESG at each stage of our investment process, we can better manage risks and identify opportunities to enhance sustainable, long term returns in the early stage companies in which we invest. We consider ESG issues to be:
For a more detailed overview of example E, S and G issues in venture capital, see appendix 1.
We believe that venture capital investing plays a vital role in creating the next generation of industries that can be engines of job creation and economic growth. Deep technology startups in particular, which have novel science or engineering innovation at their core, may help solve some of the greatest challenges facing humanity. This is why we have framed our investment capability around six big, global challenges that align well with opportunities for positive ESG initiatives:
As a signatory to the United Nations Principles for Responsible Investment (UNPRI), we commit to:
Table 1- ESG is incorporated at every step
Our initial investments are predominantly at early stages (preseed and seed). We are an active owner and aim to help build the companies in which we invest. Our time horizon is long (10+ years) and we generally have board seats (director or observer) and reasonably large, albeit minority, ownership stakes. This gives us the opportunity to engage early and help establish positive culture, values and behaviours in relation to ESG, that can be more challenging to introduce and ingrain in a company once it is more mature.
ESG is embedded into each step of our investment process, from the earliest conversations with founders, to more formal due diligence, investment committee memos and transaction documentation, then ongoing monitoring and reporting. See table 1 above.
We recognise that ESG initiatives ought to be ‘age appropriate’, reflecting the stage and available resources of our portfolio companies. We generally encourage our companies to start incorporating ESG considerations early, even in a small way, and seek to continuously improve. We are currently developing a toolkit to help our companies navigate their ESG journey as they grow and mature.
We share best practice ESG initiatives in group forums with our portfolio companies. Recent topics have included B-Corp certification and Life Cycle Assessment analysis, where these can be meaningful to attract customers, talent and other coinvestors in some of our portfolio companies.
We assign each of our portfolio companies an internal ESG rating before we invest and update it throughout the term of our investment. Internal ratings are outlined overleaf:
ESG issues aren’t always black and white, often they can be deeply complex and multi-faceted ‘grey’ areas. When we encounter these ‘grey areas’ we tend to find that what matters most is the spirit in which the leadership of a portfolio company comes to the table.
For this reason, we spend a lot of time with the founders of prospective portfolio companies prior to investing so that we can understand their motivations and ensure we are aligned on certain key ESG issues.
We believe ESG integration is strongest when all members of our investment team are responsible for assessing, discussing and incorporating ESG into our investment process.
We track ESG progress in each reporting period, with the goal of continuously improving our engagement with portfolio companies over time.
We apply the key principles of our approach to ESG across our investment portfolio to our own business activities, with a goal to continuously improve. Below is a brief overview of our current approach:
Environment: As we are located on CSIRO sites, we participate in CSIRO environmental impact reduction for office based activities, which are integrated into CSIRO’s internal ESG monitoring and reporting. We are committed to reducing unnecessary travel, and offsetting our flight emissions to reduce climate impact.
Governance: Our Board, and the boards of related companies that serve as trustees and general partners, are diverse and AICD trained. We are externally audited for financial and operational performance annually. We have a clear company constitution. Our investment decision making is clearly governed by our Investment and Advisory Committees. Executive compensation is subject to market review. Risk management and business continuity plans are in place and regularly reviewed. We are members of the Australian Technology Council and the Australian Investment Council. We have robust provisions for escalation of issues / whistleblowing.