Demand for diversity and ESG driving investors towards venture capital

MORE INVESTORS Are prioritising investments that generate positive social outcomes and avoiding or divesting assets that harm the environment or community such as fossil fuels and gambling.

Stoic Venture Capital Partner Geoff Waring said more investors were turning to socially responsible investing strategies that allocate more towards companies in sectors such as healthcare and technology addressing climate change.

“Recent disasters such as the pandemic and NSW floods and bushfires have led more investors even further towards socially responsible investing,” Dr Waring said.

“Investors want to know that their money is working towards positive social goals and are seeking more rigorous reporting from companies about how they achieve those goals.”

Another area investors are keenly focusing on is diversity and inclusion in line with increasing community concern about progress towards equality, he said.

“Start-ups that rank higher in terms of diversity and inclusion are preferred among companies whose technology has positive social impacts,” Dr Waring said.

“Investors understand that companies which prioritise gender diversity and supporting more inclusive places for LGBTQI+ are more socially sustainable in the longer term.

“Investors are taking proactive steps to urge fund managers and companies to do more and be more transparent about advancing real change.”

Dr Waring said to answer the sustainability wishes of the public, large fund managers and individual wealthy sophisticated investors are looking at allocating more to venture capital managers as they invest in nimble and fast-growing start-ups that target big unmet environmental and social needs.

“The high performing venture capital firms will be those that concentrate on innovative and economically viable solutions to society’s big problems,” he said.

“This is seen as a more socially responsible alternative to listed equity funds that focus on more established companies using mature technologies with poorer environmental and social outcomes.

Dr Waring said socially responsible venture capital investing could generate attractive returns, but it was important that investors were careful when selecting the right venture capital managers.

“You must be rigorous in assessing whether a venture capital manager invests in genuine socially responsible start-ups, and still has the ability to generate superior returns” he said.

“These are managers that select companies who value diversity along with solving social problems or who offer sustainable solutions.

“In the long-run these companies offer investors attractive returns along with the comfort that their funds are working towards the greater good.”

About Stoic Venture Capital

Stoic Venture Capital provides financing for early-stage companies, particularly those arising from university research. Stoic is unconditionally registered as an Early-Stage Venture Capital Limited Partnership (ESVCLP) and takes a collaborative approach to investing in the highest potential companies. Atlas Advisors Australia AFOF is the major limited partner for the Fund.

www.stoicvc.com.au

Stoic Venture Capital’s investments include:

• Cardihab (Digital cardiac rehab); 

• Ena Therapeutics (Enhancing immunity to fight respiratory diseases);

• Certa Therapeutics (Drug for treating kidney disease);

• Wildlife Drones (Drones tracking animals); 

• Agerris (Agricultural robots);

• Kinoxis (Addiction rehabilitation);

• Occurx (Drug to treat eye damage from diabetes);

• Que Oncology (Breast cancer side effects treatment);

• Ferronova (Magnetic nanoparticles for cancer diagnosis); and 

• Q-Sera (Blood collection);

• PERKii (Probiotic drink);

• Occurx (Eye damage from diabetes).