At this year’s Tech in Asia Conference, our annual Startup Arena Pitch Battle returned offline, with four judges and scores of audience members watching six startups battle it out for the top spot. This edition, sponsored by East Ventures, focused on startups addressing environmental, social, and governance (ESG) issues.
After an intense competition, Singapore-based Zuno Carbon emerged as the champion. The firm, which provides end-to-end carbon management solutions to help organizations measure, offset, and reduce emissions, walked away with US$10,000 in cash and other attractive prizes.
East Ventures partner Avina Sugiarto and principal Yinwei Liang with Hari Nair, co-founder and CEO of Zuno Carbon
As part of the event, the audience learned about East Ventures’ efforts in the ESG space and its thesis around investing in startups. Tech in Asia COO Maria Li sat down with East Ventures partner Avina Sugiarto to find out more.
The rising importance of ESG
According to Sugiarto, ESG is an essential part of what East Ventures does. Right from the beginning, the firm has always backed companies that are making a difference.
“We were the first institutional investor [to back] Tokopedia,” she explained. “Tokopedia as a platform in itself was already creating a lot of impact [for] micro, small, and medium-sized enterprises, allowing them to sell all over Indonesia.”
Other companies East Ventures has invested in include Xurya, which focuses on renewable energy, and Aruna, a marine and fishery startup – both these firms offer solutions that have a positive impact on people and the environment.
“When we look at the decades of history of our investments, there is a lot of positive impact that’s already generated, [though we] didn’t really look at it in a methodical way when we invested at the time,” added Sugiarto.
She points out that ESG is also becoming increasingly important for the companies themselves.
“What’s great to see is a lot of the founders [in our portfolio], without us really asking them to incorporate ESG and impact considerations, are becoming very, very mindful and wanting to work on this,” said Sugiarto. “They’re hiring ESG specialists, they are looking to work with ESG consultants… this is something that we see in the mindset of a lot of the founders today.”
In Sugiarto’s view, while adoption of ESG solutions by consumers is still in its early days, there are plenty of opportunities in the B2B space. Companies are now willing to pay a premium to use solutions and services aligned with ESG goals.
She highlights Indonesian beauty retailer Sociolla as an example. The firm has scrapped the usage of plastic bubble wrap and changed its shipping packaging to more environmentally-friendly paper-based materials – a move that will cut Sociolla’s plastic use by around 250,000 square meters a year.
While this did increase its costs, the firm’s management team felt it made sense in the larger scheme of things.
“When we asked the founders why, they said, ‘this is an increase in costs at the moment, but as we grow ourselves in the next year or so it will be absorbed eventually,’” she shared. “And customers who are much more mindful about sustainability will keep coming to the platform. [There will be an] increase [in] sales through the marketing that comes with implementing these sustainability practices.”
Building up the resources
Given this growing demand for ESG integration, East Ventures has started enacting the necessary processes and resources to help the firm, its portfolio startups, and its partners better understand and measure their ESG efforts, Sugiarto says.
“This year, we are doing a lot of work in terms of capacity building, formalizing [these ESG practices] into a toolkit, putting in place policies and procedures, and also having a lot of our portfolio companies doing the same as well,” she said.
East Ventures’ ESG toolkit addresses two key areas: where a company stands in its ESG journey, as well as the impact it has and could potentially have.
Companies can answer a series of questionnaires to determine how they’re performing according to the International Finance Corporation’s ESG performance standards, which cover everything from labor practices to environmental issues. Through this, businesses get a broader picture of where they stand in the larger ESG story and are able to identify areas for improvement.
East Ventures also refers to the United Nations’ Sustainable Development Goals to assess how a startup is making a difference to society and the planet, and has an ESG team that works to get companies on the sustainability track.
“We work with our startups in terms of identifying impact opportunities, identifying gaps,” Sugiarto explained. “We open up our resources and ecosystem – whether it’s our own teams or through consultants, networks, and investors – to our startups, and help them fine tune the impact they can really double down on in the journey, both in the short term and in the longer term.”
The firm has also signed a memorandum of understanding with the World Resources Institute Indonesia and Indonesia Chamber of Commerce and Industry’s Net Zero Hub to foster strategic partnerships and collaboration to advance commitments toward achieving net-zero targets.
Some advice for climate tech startups
As East Ventures continues on its journey toward a more sustainable and equitable future, Sugiarto shares that the firm has its eye on backing startups in a few key areas: climate tech, food and agriculture tech, renewable energy, and urban mobility, especially in terms of electric vehicles.
However, the firm’s main focus is that the startups it invests in are led by a strong founding team and have proven solutions that can be scaled up.
“Founders have to know how you can set yourself apart, whether through your experience or your ‘it’ factor that’s different from others,” said Sugiarto. “You also need to show the big market potential that you have for your solutions – those two are key for us.”
And for startups in the climate tech space specifically, Sugiarto recommends finding a way to actively measure their impact on the environment.
“We are all moving towards a net-zero target,” she said. “So if you can measure this potential – whether direct or indirect, whether it’s decarbonization or reducing other greenhouse gases – if you can calculate that in a more measurable way, that’s definitely a key consideration.”
Original article at Tech in Asia, 30 November 2022.