By: Sifted
June 23, 2022
“If I had to choose between switching to renewable energy or keeping staff on, I’d definitely put aside that energy transition,” Micol Chiesa, formerly head of impact at Five Seasons Ventures told me this week. “And that’s a fair choice,” she added. Her comments sum up the current reckoning that ESG is facing perfectly. The acronym arrived in the mid-2000s to describe how investing could bear more than just profit in mind — you could invest and do good. The mantra worked well for the long bull market that followed the global financial crisis, but rising inflation and geopolitical concerns are revealing just how fragile this philosophy is when the going gets tough. But that fragility might matter less in VC, one of the last asset classes to embrace ESG. Mainstream European VCs only started getting serious about ESG around 2019, and many have already pioneered frameworks they think work better. VCs often tell me the term has long been too baggy and catch-all to be useful. Chiesa says one industry peer said that although there may be problems with the framework, saying ESG is dead is like saying human rights are dead. “But as a framework, it might be dead.”