Successful Tech Investors Predicted to Stick with ESG

Despite the headwinds, successful tech investors will stick with ESG, according to Simon Hombersley, Chief Executive Officer of Xampla, a Cambridge-based manufacturer of natural alternatives to plastic.

Venture Capital’s Focus on ESG

In the past ten years, capitalism has been taking on a new and more progressive shape.  The smart money in venture capital has been headed for funds which see both the future of the planet and the happiness of their workforce as the foundation stone of a healthy bottom line.

Those taking this view have been rewarded. Long term research from data agency Morningstar has shown that over the past decade, the majority of sustainable funds delivered higher returns than equivalent conventional funds. Green investment tends also to be better insulated from market shocks.

In fact, sustainable funds have a much greater chance of survival than non-ESG vehicles. 77 percent of ESG funds available in 2012 still exist today, compared with only 46 percent of traditional funds.


Companies Taking a Step Back

However, no one could predict the economic effects of Covid. Now there is a sense that ‘money is running out’ – as a result, some venture capitalists are preferring to play things safe and opt for short-term gains rather than sustainable ROI in the long-run.

Allowing ESG to be written off as a pointless label risks seeing companies take a step back when many of us want to see the big brands go further and faster – particularly in the fight against plastic.  Indeed, our thesis at Xampla is that the old way of doing things will prove to be higher risk in the end.

In the plastics space, while government and regulation continue to focus on outdated and increasingly unsuccessful recycling techniques, ESG venture capital rightly realises that it is newer and deeper technology which will shift the dial and rid our everyday lives of the plastic everyone loves to hate. Those who recognise this are picking up on a global megatrend which the likes of Smith may disdain today, but which will be rewarded tomorrow.

For prospective investors, Xampla – the UK’s first University B-Corp – appeals to the heart and the head: the market says such firms will do well, and helping them do well helps everyone else into the bargain.

As the world emerges (eventually) from Covid, the very worst response would be to look back with rose-tinted glasses to the days of quick wins and fast bucks.  Instead, as never before, ESG investing will be the foundation stone of any strong tech portfolio, using capital to shape a better future.