By Ros Bazany, Head of ESG and Impact at Antler, a global early-stage venture capital firm.
Antler is a global early-stage venture capital firm enabling and investing in the world’s most exceptional people building the defining companies of tomorrow. The team published their inaugural ESG and impact report last year with an aim to share their learnings and roadmap with the industry.
We spoke to Antler’s Head of ESG and impact, Rosalind Bazany, to get further insight into Antler's approach and what they have done since publishing the report.
Let’s kick off with an easy one. What is the difference between ESG and impact?
This is a great first question and not as easy as you think! It often creates confusion in the industry, and it is important to distinguish between them.
When we talk about ESG, we see it as both the risk and opportunity connected to the company’s operational practices that relate to environmental, social, and governance factors. In simple terms, this means all the non-financial aspects that can influence a company's performance. For example, workplace culture and employment practices, responsible product design, data protection, and environmental effect. Awareness and improvements across these factors have proven to lead to not only more sustainable businesses but also stronger performance. They are factors that every company can, and should, think about.
We use impact when the company’s objectives, product, or services lead to a positive environmental or social benefit that is intentional, demonstrable, and quantifiable. ESG and impact should not be seen as mutually exclusive - I firmly believe that if you do not incorporate ESG factors in your business, you can’t be considered an impact company.
What role do you think venture capital firms can play in improving ESG and impact within the business?
VCs can play a significant role. We like to think about our ESG and impact strategy across three different pillars: investment, internal, and influence.
On the investment side, we have embedded ESG and impact in our investment decision-making process to help channel capital to sustainable businesses and companies responding to the world’s greatest challenges. All our offices adhere to our ESG and impact policy for consistency in our investment process.
Our internal pillar is thinking about what Antler does as a firm. We were one of the earliest VCs to become a UN PRI signatory, aligning ourselves with the six guiding principles for responsible investments. In November last year, we published our inaugural ESG and impact report, which was our attempt at vocalizing what we thought industry best practices should look like for VCs. At the same time, it allowed us to think about priority areas for improvement and helped us develop a roadmap for future projects. This included actions around better education for founders, improved portfolio company monitoring and tracking, and firm-level actions. Firm initiatives included assessing our carbon footprint and setting up a D&I council to support greater inclusion across aspiring entrepreneurs and our employees.
And the last pillar: influence. I feel this is arguably the most critical dimension for an early-stage VC firm. Antler can influence founders and set the right foundations for companies with ESG and impact embedded in their DNA at the earliest stage. We recognize there is so much information on ESG and impact that it is sometimes difficult for founders to know where to even start. At the earliest stage, we want to focus on creating awareness and setting the right intentions. With this in mind, we developed the Antler sustainability toolkit as an educational platform for founders. It offers manageable and practical guidance to incorporate ESG and impact into business models - asking key questions and sharing useful tools.
Do VCs actually contribute to society and/or the economy?
Yes! Research tells us that VC firms contribute 28% to GDP. VC firms invest in companies that create jobs, support economic growth, and provide innovation to countries that need it most. VCs are impactful because they invest in companies that develop products and solutions that can directly (or indirectly) improve people’s lives and respond to some of society’s most significant challenges, such as climate change and social inequality.
Around 70% of Antler portfolio companies align with the UN Sustainable Development Goals (SDGs), and over 160 of these meet our definition of an impact company. We have examples of portfolio companies providing underserved communities with access to healthcare, education, and financial services. We have companies supporting the energy transition to renewables and the creation of circular economies to reduce waste or deliver innovative clean water solutions. Our portfolio companies have a great impact globally, and Antler provides them with a global platform to do this at scale.
Since 2018, Antler has helped support almost 3,500 founders and given funding to around 700. We expect by 2030, their companies will have contributed over US$34 billion to global GDP and created over 210,000 jobs.
Our primary goal is to find and enable great founders to build incredible companies. We also want to deliver attractive returns to our investors and for Antler to be a great company to work at.
What role can Antler play in making entrepreneurship more diverse and inclusive?
Antler’s mission is to democratize entrepreneurship. Our belief that successful founders can come from anywhere takes us to all corners of the world. Our founder base shows a diverse set of people who represent many different nationalities, backgrounds, and life experiences. Our investments are also diversified, not just by geography and sector but also by the problems our founders are trying to solve with their products.
We have 23 offices globally, including in countries such as Vietnam, Indonesia, South Korea, India, Brazil, and Kenya. Our founders currently represent over 70 nationalities. Our global platform provides founders with support, community, and capital at the earliest point in their journey to facilitate a greater probability of longer-term success. Our expansion model is very ambitious. We will use our repeatable operational process to support emerging tech ecosystems in developed and developing countries. This also provides our founders with on-the-ground support and knowledge for market access during company expansion.
Antler’s founder selection process varies from the typical VC approach. We receive more than 50,000 applications each year and work with the top 1% of entrepreneurs evaluated. We believe conscious and unconscious biases are heightened if an investment decision process is short. When we invest in a portfolio company at the pre-seed stage, we would have typically worked with the team for more than three months or around 200 hours. This is significantly longer than many other VCs.
Getting in early can support inclusion across entrepreneurs too. Often, aspiring founders are unprepared on their entrepreneurial journey and struggle to even get to the capital-seeking stage. This is particularly prevalent in women entrepreneurs. As such, we have developed a free online education platform called Antler Academy for aspiring entrepreneurs worldwide to give them the proper preparation and resources.
Have you seen demand for ESG and/or impact mandates among the LP community?
There has been a notable shift which has been particularly obvious in the last 12 months. There is increasing demand from institutional investors for VCs to demonstrate robust ESG frameworks throughout the investment decision-making process. The level of ESG awareness and understanding that has been seen and applied to their public market investments is filtering through to private markets rapidly.
When it comes to impact, LPs are recognizing two things. Firstly, impact mandates don’t strictly have to go to impact VCs. Antler doesn’t solely invest in companies that meet our definition of impact, but we recognize it is essential to identify these companies to tailor our support. Secondly, companies that directly look to address the world’s greatest challenges can also deliver strong returns. There are now over 180 impact companies globally that have reached unicorn status. Last year, we launched our Copenhagen office to focus purely on finding founders focused on planet-positive innovation and have seen some great portfolio companies built from there already.
How do you incorporate ESG and impact into your investment processes?
We hope that Antler’s end-to-end process clarifies to founders the importance we place on ESG and Impact practices. It is embedded in our founder engagements and training, investment process, and firm-level values. We start thinking about ESG at the earliest point of origination when we share our values and cultural principles with founders.
Our due diligence process includes an ESG and impact questionnaire for follow-on investments used in the investment memo prepared before an investment committee. This questionnaire delves deep into how a company manages stakeholder relationships, environmental stewardship, and internal controls. The output delivers an ESG score and impact category that follows the Impact Management Project (IMP) framework as a guide.
ESG and impact expectations are also incorporated into the investment legal documentation
Antler assesses whether the portfolio company addresses the UN SDGs and their underlying targets as well as if a portfolio company meets our criteria and definition of impact. The SDGs are a great way to represent how portfolio companies can contribute to a more sustainable future and also demonstrate the positive outcomes of VC investing.
How do you plan to monitor and track the progress of portfolio companies relating to both ESG and impact metrics?
This is a great question and one I know many of us within the industry are exploring currently. ESG and impact are still in their very early stages of development within the VC industry. This means there are few standards or frameworks that are appropriate for VCs. There are groups trying to change this, such as VentureESG and UN PRI. However, it is still likely we will need to develop and adapt tools and processes to be appropriate and relevant for our approach and founders.
We have developed an Antler sustainability health check for portfolio companies. This is a short, stage-sensitive questionnaire that will be sent annually. After completing the questionnaire, a results email provides an indicator score to founders as to whether their ESG and impact awareness and intentions are on track or need more attention. This approach also allows Antler to monitor portfolio companies and step in if further support is needed.
What Antler achievements are you most proud of?
As a woman in the industry, I can’t help but be proud of Antler’s approach to D&I. From day one, it was clear to me that the Antler team celebrates multiple points of view. We believe that the path to entrepreneurship should be available to any brilliant and ambitious person, embracing the entire span of diversity.
This view is perfectly demonstrated by our female founder ratio across the investment funnel, which remains stable at around 25% from application to funding (vs. male founders). We are painfully aware that VC funding to female entrepreneurs is still lagging - according to CrunchBase, it is still around 11% for portfolio companies with female co-founders. Antler’s level across our portfolio companies remains stable at 33%. These figures tell me that once founders are given the opportunity and receive the right support over a substantial period, they can be successful, regardless of gender. We think this is further supported by the fact that a third of Antler’s leadership team is female.
For us, ESG and impact represent a journey, and we are all still just at the beginning. We are, however, hugely excited about what the future holds.
All posts are the opinion of the contributing author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CAIA Association or the author’s employer.
About the Author:
Ros Bazany is Head of ESG and Impact at Antler, a global early-stage venture capital firm. Prior to this, she spent 14 years working in the finance industry, covering institutional and intermediary clients at the global asset manager Schroders and the hedge fund BlueCrest.
