www.business-review.eu Business Review | November 2021
34 ENTREPRENEURSHIP
ESG thinking begins to permeate local startup ecosystem Environmental, social, and governance (ESG) factors are starting to become a crucial part of sustainable investing and the European Union has been providing companies with a related regulatory framework. The concept will apply to all companies located or doing business in the EU, and new startups could emerge as the competition for the highest ESG scores intensifies. By Ovidiu Posirca provides scores from 0 to 100, according to CB Insights.
SUSTAINABLE TRANSITION ACCELERATED BY THE PANDEMIC Ionut Tata, the CEO of Iceberg Plus, a startup consultancy, suggests that startups innovating by embedding green technologies or components into their core offer of products and services will likely find new investors, partners, client bases, and opportunities under this new framework. “Discussions about the widespread legal and financial repercussions, newly imposed standards, as well as sourcing funds and cost-effective ways to implement required changes are at the forefront of how entrepreneurs and funds relate to environmental and social responsibility standards,” Tata tells BR. “Additional resources may need be redirected to meeting the new requirements, some KPIs may have to be reconsidered or postponed until new provisions are set in place, while pricing and cashflows may suffer alteraMonitoring ESG performance should come easily and naturally for startups
I
tions. Entrepreneurs and investors in sectors such as energy, transportation or agriculture should be the wariest of these changes,” he adds.
n terms of environmental matters, a
Regulation (SFDR) became mandatory for as-
company can be assessed on its energy
set managers, venture capital funds, private
use and the way it handles waste and
banks, and other financial market players,
comes on the backdrop of the health crisis,
limits pollution. For the social component,
wrote Isabelle de Cremoux, CEO and manag-
which has highlighted many social and
what matters is the way in which a company
ing partner at VC firm Seventure Partners, in
health inequalities. The VC industry, which
engages with customers, employees, and
an article for sifted.eu.
backs startups, can play a part in tackling
other members of the community. On gover-
In short, ESG encourages companies of all
The focus on the sustainable transition
some of these challenges under the ESG framework.
nance, factors such as company leadership,
sizes to incorporate sustainability into their
internal auditing, and shareholders’ rights
operations. There are a number of different
are key.
scoring mechanisms currently being used on
point out that VCs have the chance to help
the market. For instance, MSCI ranks firms
companies integrate ESG factors during their
on a scale of CCC to AAA, while Refinitiv
formative years, embedding ESG perfor-
Last spring, ESG disclosure obligations under the EU Sustainable Finance Disclosure
Representatives of professional firm PwC
