We spent the first week of June in Berlin, as we have for the last four years. Two venture capitalists among the thousands of investors and asset owners descending on the city for the world’s biggest GP-LP gathering, the dual SuperVenture and SuperReturn conferences.
This year, the buzzy topics were the emergence of Europe as a hot investment destination, the ascendent defense-tech opportunity, and of course, AI. Private credit is still buoyant. People wrung their hands about the lack of liquidity and the decline of the buyout sector. The celebrity draws continued thi year as well, with Bono, the U2 frontman appearing on stage with his climate investment collaborator, Jim Coulter of TPG; and tennis legend Serena Williams, who talked up her VC fund.
We at Venture ESG try to stay away from the suit-wearing crowd around the Intercontinental and stick to the trail of Common Projects and On-shod VCs at the Hotel Palace. For us, SuperVenture is a good pulse check: who is saying what, on and off stage, when it comes to responsible investing, from ESG to impact?
Coalition of the committed
The panels on stage and in boardrooms are one indication of where the VC ecosystem is. This year, many big name LPs, from Schroders, EIF, KfW Capital, Allianz and Adam Street, participated in conversations on ESG, responsible AI and DEI. From the top down, their guidance is clear: there is a strong business case for responsible investing, especially in the long run, and the asset owners are working towards making it a hygiene factor, something that everyone has to do.
What has become clear also for these LPs: ESG as an abstract acronym might have run its course, at least in conversations with early stage investors and their portfolio companies. Material ESG risks — from climate considerations and online safety to good governance and supply chain risks — are just… part of how you make investment decisions. If you are not on board with that, dear VC, we will have a very hard time wiring you money.
To be sure, there are blips and disappointing setbacks; the responsible investing agenda isn’t moving quite as fast as we’d like. One LP, Elodie Donjon of the European Investment Fund, pointed out on stage that the impact agenda — even around climate investing — is stalling. Founders care but the strong tailwinds of two years ago are gone. Similarly, the progress we have made both in Europe and the US when it comes to diversifying decision makers — GPs and founders alike — is still unacceptably small (for a snapshot, see the recent UK Female Founder Startup Coalition report).
From the LP side, there is a strong coalition of the committed pushing forward, including big American institutions. Perhaps there is even more reframing necessary, to shift language but also to focus on material issues (i.e. the stuff that matters for the bottom line). This is also where the VC investors come in.
Political momentum in Europe
When you ask the GPs at SuperVenture, including many Americans that came over to meet European LPs, the mood is actually much more aligned with this ‘material focus’ than we might have expected. Sure, participation and attendance at our ESG panels wasn’t that high – but our impression was that that was more about everyone already ‘doing it’ than a genuine retreat from the practices.
No VC we spoke to in Berlin saw material responsible investing practices as running counter to their efforts of funding big, scalable companies. As one person pointed out to us: ‘If you say you don’t want to do responsible investing, that kind of automatically means you are an irresponsible investor. Who wants to be like that?’
And then there are the opportunities arising from the continuing anti-woke backlash in the US and the unstable geopolitics, especially for Europe. VCs believe there is now a real chance to capitalize on European climate and deep tech. While there are big question marks around how to make dual-use and defense investing responsible — something we have been actively working on — the political momentum in Europe for funding innovation is strong. The bigger presence of American GPs at this year’s SuperVenture was one telltale sign.
Stand up for values
With the US backlash against DEI, including as part of investment considerations of VCs and LPs, people are hitting a hard red ‘No’ line for the first time.
Do we need to go beyond simple business case considerations and stand up for our values?, I asked the panelists on my ‘ESG business case’ panel. The response was unequivocal: Europe should stand up for its values, and not necessarily be guided by American “exceptionalism,” including in venture capital.
The business case for responsible investing and DEI will continue to be driving factors. But any action as radical as ‘banning’ DEI is not an option also for ethical reasons. Especially for the large government-backed state LPs in Europe, diversifying the ecosystem is a goal in and of itself, not just a nice-to-have. We are expecting to hit similarly hard value-lines in areas such AI safety and climate investing.
We believe this is a good moment for Europe, filling the leadership void of some of the quieter Americans right now, from Berlin into the world.
