AIN’s Head of Impact and CEO of SeedTribe, Olivia Sibony peers into her crystal ball for 2021 to see what it has in store for the impact investment space.
With the huge focus on the pandemic over the past year – many might have thought impact investing was on the back burner. Luckily this didn’t prove to be the case. In the teeth of the first lockdown on the Angel Investment Network platform we saw renewables become the 11th most popular keyword for searches, a rise of 34 places compared to 2018. We also saw terms like Greentech rocket up the rankings for investors looking to invest. So looking ahead, what can we expect? Here are three predictions.
A rise in interest in impact-focused startups
In 2021 we can expect more investors to back impact-focused startups. We have witnessed a new regime take office in the White House rejoining the Paris climate agreement, committed to net zero emissions. Part of a rapidly growing movement worldwide. More consumers are voting with their wallets in demanding brands’ values are in line with their own. Additionally more investors are wanting to see the ethical credentials of businesses they are considering backing. This is particularly the case with passion-driven angels. This virtuous circle means we will in turn help to inspire a new generation of entrepreneurs focused on the solutions to mankinds’ most pressing problems. We are also seeing the huge financial rewards for companies focused on ESG goals. Elon Musk becoming the richest man in the world was a watershed moment in this regard. It can be extremely profitable to embed purpose into your business model.
The establishment of more metrics for the measurement of ESG
Impact-driven investors are looking for more established measurement of environmental and social performance to give them more understanding of where and why to invest. We saw a real landmark moment at the end of the year with the big four accounting firms agreeing a reporting framework last year for ESG standards. We will see this more widely used and taken up in 2021. At SeedTribe we use the UN Sustainability Goals (SDGs) as the basis for our framework for the companies we back and for how entrepreneurs can benchmark their progress. The SDGs are the closest we have to a standard for ESG ratings. The 17 SDGs and their 169 associated targets are by no means perfect, but they are the best blueprint available to achieve a more sustainable future. They have been agreed by all countries.
What I am seeing on the ground is more demand for startups considering the full impact or end to end life cycle of a product or service. For example it is not enough to merely produce solar panels if they are not produced in a way that is in itself carbon-efficient or end up unrecyclable. Better still of course, is seeing start-ups embrace a truly Circular Economy. We need to ideally create close-loop cycles without any waste at all. A start up like Aeropowder is a great example of that. They have created the world’s first sustainable thermal packaging made from feathers – Pluumo. The poultry industry is drowning in feathers (3.1m tonnes per year in the EU alone) and has limited disposal options. Powered by feathers, Pluumo can keep food deliveries chilled while replacing expanded polystyrene. They are gaining huge interest from investors.
Increasing cross-border collaboration
One silver lining from covid is the increasing level of cross-border collaboration using technology tools. In 2021 with most travel on hold for the foreseeable future, we are likely to see the further rolling out of systems enabling start ups to collaborate and share best practice and insights. For example, WeFarm is the world’s largest farmer-to-farmer digital network. They enable farmers worldwide to SMS any farm related question to a network of other farmers who can help, enabling farmers in Colombia to learn from farmers in the Congo. These sorts of initiatives can improve efficiency, best practice and help reduce CO2 emissions. This is being led by startups but will trickle up to larger firms with enormous data pools being harnessed to create actionable insights to reduce CO2 emissions.
As we look to the future we can be confident in the vision of startup entrepreneurs and enlightened investors to help drive the change we want to see in the world in 2021.