vranda is currently working to close our seed fundraising round and these are the most common questions we hear from investors.
Question #1. Is ESG disclosure mandatory? If so, when?
ESG disclosure requirements vary. Currently, mandatory disclosure is required for certain companies in the United Kingdom reporting on greenhouse emissions, diversity and human rights. The European Union requires all member countries to report on material environmental, social, and employee related topics that address corruption and human rights. China, Indonesia, Brazil, New Zealand, and Singapore also have reporting requirements.
In the United States (US), the SEC is considering mandatory disclosures for public companies that will mostly address climate disclosures as part of the annual 10k requirement beginning in 2023 although the timing could still change.
The California Senate recently passed SB260 the Climate Corporate Accountability Act. This is the first state to take action in the US requiring large companies to disclose all their greenhouse gas emissions. If this passes the Assembly and is signed by the Governor, enactment would begin in 2024.
While mandatory requirements aren’t currently a US requirement, one could argue that ESG disclosure is mandatory as we live in a global economy. This interconnectedness became more exposed and apparent to all during COVID.
Although mandatory disclosure mostly impacts large corporations or listed companies, this disclosure will continue to percolate throughout the supply chain to small to medium sized businesses as well as private enterprises.
In short, everyone will be impacted. Leaders need to understand this and prepare now.
Question #2. What are the material issues that have to be measured/reported?
There are various organizations that have frameworks or standards to assist companies with identifying and reporting on material issues that are the most important risks facing a company.
First, it’s important to understand there is no one standard or framework. There is an alphabet soup of acronyms making things a bit murky for business leaders.
There are several organizations that aim to guide companies on how to measure, assess and report on their ESG initiatives, risks and opportunities. Some of the most prominent include:
- Global Reporting Initiative (GRI)
- Sustainability Accounting Standards Board (SASB)
- CDP (formerly known as the Climate Disclosure Project)
- Task Force on Climate-related Financial Disclosure (TCFD)
- United Nations Sustainable Development Goals (SDGs)
While standard is often rigid and generally accepted all over as the best method of doing something, a framework is at best, a frame that can be used as a practice. While a standard has just one way of doing things, a person can evolve the methodology using a framework as it is flexible and allows for experimentation.
There are efforts underway to try to harmonize these different frameworks and standards but standardization will not happen overnight. In the meantime, companies have to decide what is best for them.
Question #3. Who is liable for not acting on material risk?
While sustainability and climate risk has been a focus for decades, ESG seems like the shiny new object as it relates to financial disclosure.
The risk picture for Boards today is different from what it has been in the past. ESG risk can come in many forms whether it’s supply chain disruption or diversity, equity and inclusion, all of these things impact brand recognition, consumer activism, investor actions/activism, media coverage, investment quality ratings/rankings and regulatory actions.
That is a lot of risk and companies typically lack the suite of resources – including Board expertise and oversight – given the dynamic environment. Frequently ignored risks for general counsel and the Board include reputation risk, inadequate Directors and Officers (D&O) liability coverage and inadequate D&O indemnifications.
Key investments and acquisitions in the Climate Tech space:
Despite some uncertainty on timing of some of the above questions to play out, solutions to help public and private companies measure, report and plan their businesses within this framework are raising capital from some noteworthy investors.
ESG Reporting and Business Intelligence
- Novisto raises $8mm Series A led by Diagram Ventures and White Star Capital.
- IBM acquired Envizi for an undisclosed amount.
- Accuvio acquired by Diligent for undisclosed.
Climate Accounting/Offset Management
- Persefoni raises $101mm Series B led by Prelude and TPG.
- Patch raises $27mm Series A led by Coatue and Andressen Horowitz.
- South Pole raises $undis led by Temasek and Salesforce Ventures.
- Cloverly raises a $2mm seed round led by Circadian Ventures and Softbank Opportunity.
- Pachama raises $15mm Series A led by Breakthrough Energy and O’reilly AlphaTech Ventures.
- Watershed raises $70mm Series B led by Kleiner Perkins and Sequoia Capital.
- Emitwise raises a $3mm seed round led by Arctern Ventures and True Ventures.
- Plan A raises $10mm Series A led by Keen Venture and HV Capital.
- Climateview raises $12mm Series A led by 2050 and CommerzVentures.
- Puro.earth was acquired by Nasdaq for undisclosed.
- Planetly acquired by OneTrust for undisclosed
Supply Chain Intelligence
- Supplyshift raises $9mm Series B led by Buoyant Ventures and Bowery Capital.
ESG Investor Portals
- Onetrust raises undisclosed funds led by Softbank Vision Fund and Coatue.
- Sphera was acquired by Blackstone for $1.4bn.
Risk Management Tool
- RMS acquired by Moody’s for $2b.
