Venture Capital Providers Agree on Sustainability Clause

Published 29 January 2020

We see a largely increased focus on sustainability and impact from all players in the start-up eco-system: From being a “nice to have” factor, focus on sustainability and impact is increasingly becoming not only a valuation driver but a “deal or no deal” factor.

In Germany, some of the largest venture funds have joined forces to develop a sustainability clause in cooperation with Leaders for Climate Action, an association of more than 300 leading digital entrepreneurs in Germany and Europe, ensuring that their portfolio companies strive for more climate protection. The sustainability clause shall be implemented in the legal documentation and will, among others, require the portfolio companies to:

  • Measure their CO2 emissions, draw up climate-friendly travel guidelines and purchase electricity from green providers;
  • Evaluate the financing of certified climate projects as a compensation measure and include such financing in the budget planning; and
  • Ensure that employees, partners, suppliers and customers are aware of climate protection.

The hope is that this will initiate a “domino-effect” that will spill over from digital start-ups to other sectors of the economy.

We are yet to see a similar (or even more ambitious, perhaps including other SDG goals) initiative in Denmark, but the trend is clear: Focus on sustainability and impact is becoming a key factor in the eco-system, not only for founders, but also for business angels, VC and buyout funds and LPs in such funds.