What's (your) ESG?

Conscious Collective Journal: 1st Edition

Welcome to our inaugural VSQ Conscious Collective Journal. We’ll be taking this time to provide updates on portfolio companies or ventures we believe stand out and to explore content we feel is relevant to our journey together in order to enhance your experience and knowledge as a conscious investor.

ESG. You’ve likely heard the term: Environmental, Social and Governance, a set of standards for a company’s operations that investors use to screen potential investments. The month of May was particularly busy with regards to ESG ratings and disclosures with SEC Chairman Jay Clayton stepping in to caution against integrating separate ESG metrics into one single rating.

Various arguments have been made around the value this criteria actually holds when dealing with sustainable investments. We’ve rounded up a few recent pieces that capture these different points of view. This list is by no means exhaustive and serves to provide an avant-goût of the various sides of the debate as we fine tune our reflections on ESG as it applies to our own endeavors within the Conscious Collective. 

Climate Risk = Investment Risk

BlackRock CEO Larry Fink’s much anticipated annual letter often serves as a clarion call to chief executives worldwide. This year was no different but he made clear that we’re on the brink of a true redefining of finance.

“We believe that sustainable investing is the strongest foundation for client portfolios going forward. A company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders.”

Given the rapidly changing dynamics COVID-19 brought about, however, he issued a second letter worth reading as well addressing practical measures BlackRock is taking to incorporate ESG and sustainability into their portfolio construction, aiming for all active portfolio and advisory strategies to be fully ESG integrated by the end of 2020. This was picked up more recently last month by Bloomberg Green when BlackRock, Allianz Global Investors and Investco shared how their sustainable portfolios have weathered the recent storm. Watch this space as we anticipate an increased focus this year on sustainability frameworks and discussions amongst the mainstream financial players.

Larry Fink Isn’t Going to Read Your Sustainability Report

In this Harvard Business Review piece, Mark Kramer responds to Fink’s letters arguing the need for a new language that bridges sustainability and economic performance.

“If Fink is correct in predicting that capital will increasingly be allocated to those companies with the most sustainable business models, then investors will need new sources of data to understand and anticipate the economic significance of sustainability strategies.”

What Technology & The COVID-19 Crisis Are Teaching Us About Conscious Investing

VSQ Partner Sonia Weymuller recently shared her reflections in Entrepreneur Middle East on the pandemic’s ramifications and how issues of public health and the environment need to underpin any investments now being made.

“Just as we’re seeing technology act as a multiplier for good, it’s also time for VCs to act as a magnifier - of good. It is up to us to ensure the investments we choose to make are true reflections of our collective consciousness.”

VSQ Portfolio Spotlight: Pachama

Carbon — Impact.tech

Founded by Diego Saez-Gil, Pachama is “aiming to bring reforestation projects to the carbon markets whose impacts can be independently verified by the company’s monitoring software to ensure their ability to offset emissions.” The company recently teamed up with Microsoft, who pledged to go ‘carbon negative’ by 2030, in order to track forest carbon stocks using a variety of technologies including LiDAR, AI and satellite imaging. They also partnered with Shopify last month as their sole provider for their Offset and Shop offering. “Our goal is to put this technology to the service of making faster, cheaper, and the more reliable issuance of carbon credits involving forests,” says Saez-Gil.

Interview: Fahmi Al Shawwa, Immensa Labs

Fahmi Al Shawwa, Founder & CEO of VSQ portfolio company Immensa Labs, shares with us how he chose to recalibrate his 3D printing business to address mask shortages and supply chain disruptions due to COVID-19.

Tune in: Our Podcast Picks

We’re fortunate to have an avid podcast listener on our team. Lola Fernandez lists her top 3 picks for the month:

  1. NYT The Daily: Can Corporations Stop Climate Change?

One letter to executives around the world has prioritized climate change on corporate agendas. But will this make a difference without government regulation?

  1. Bloomberg Trillions: Everything is ESG Now

BlackRock is looking to double the number of sustainable ETFs it offers and pressure index providers to create more ESG-related benchmarks. How much will these moves ultimately matter, given that ESG ETFs currently have just 0.5% of the overall ETF pie? And what’s the more powerful force: pressure from activist consumers or activist investors? This episode delves into the topic of ESG investing to explore its promises and limitations.

  1. Ted Talks: Audrey Choi - How to Make a Profit while Making a Difference

Can global capital markets become catalysts for social change? According to JP Morgan CMO & Chief Sustainability Officer Audrey Choi, individuals own almost half of all global capital, giving them (us!) the power to make a difference by investing in companies that champion social values and sustainability.

"We have more opportunity today than ever before to make choices," she says. "So change your perspective. Invest in the change you want to see in the world."