In the second part of this exclusive interview series with GBI Magazine (click here to read the first part), Jenson Funding Partners’ Sarah Barber discusses the state of ESG funds.
Barber explains why the ESG concept is so important and discusses the need for increased diversity in the VC market.
Q: Why do you think ESG is important?
It comes back to this all-encompassing acronym, ESG. Sometimes we need to break it down and understand each element, and why they’re important to a business. The important thing about ESG is that these are practices that, if incorporated correctly within a business, can create greater returns for all stakeholders involved.
We need to make sure with our early-stage investments that we don’t scare our portfolio companies with the acronym. We need to make sure they’re thinking about it from the start, broken down into how it’s going to affect their business and how it’s going to give them the ability to take their business forward and generate better returns.
It’s been demonstrated that having inclusive and diverse teams increases returns. That makes sense if you’ve got a variety of thoughts going into your company from a variety of backgrounds. This means you can pick the best ideas to project that business forward rather than all of those ideas coming from the same homogenous group.
Governance sits over all of this. If you’re not on top of your numbers, you can’t learn from what you’ve done in the past, and you can’t see what’s going to happen going forward, utilising that knowledge that you’ve got.
If you break it down for founders, they shouldn’t be scared of that acronym. They should see it as something that is core to their business. We’ve always invested at an early stage with the belief that if we’re committed to investing in the best solutions, we need to be attracting them from the entire market and again, not from one same homogenous group. It’s about making sure that, as an early-stage investor, we’re trying to get deal flow from as many sources as possible.
ESG isn’t a fad. It’s a good way of actually generating better returns. It’s become a buzzword that starts to scare people and make them think they have to do something differently, but it should just be entrenched within the business to enhance those returns.
Q: Do you feel that the VC industry is investing enough in diversity?
This comes down to the stages that we invest in. It’s difficult for me to speak for other fund managers because I have a fundamental core belief in what we should be doing as a fund. I believe that positive steps are being made across the sector, particularly around gender with the Investing Women Code.
However, I’d like to see an increase across all diversity factors. I think inclusivity is extremely important. We tend to focus on one aspect, but there are plenty of founders from different backgrounds that we should be considering. We’ve got the locality, socio-economic status, and beyond. I think investing at an early stage is a way for the VC industry to broaden its diversity. Funds need to be leading by example. Our impact report revealed that 40% of our founders are female, while around 40% are from an ethnic-minority background.
Founders quite often come to us and say they feel comfortable with us because we look different. That has attracted a more diverse set of founders as well, so I think the VC industry needs to start leading by example diversity-wise. It’s not good enough to just change one metric, you need to change them all.
To find out more about Jenson, click here.
