Responsible Investing With Venture Capital

Abstract

More often than not, responsible investing (RI) is associated with “patient” capital and sustainable development. Venture capital (VC), by its objectives to invest in projects with very high returns and exit quickly the market, is rightly considered as “impatient” capital, and as such, it is a less likely candidate to contribute to sustainability. This chapter advances the argument that VC can indeed contribute to sustainability, should it adopt the ESG factors into its investment criteria. This is illustrated using the case study of a Canadian VC firm, the Cycle Capital Management (CCM). The latter uses strict ESG criteria and rigorous decision-making mechanisms in the screening, evaluation, and the choice of highly lucrative and innovative projects with the aim to contribute to the Canadian economy's sustainability through its efforts to reduce the environmental footprint of its investments. Policy makers and regulators should develop policies that promote the growth and development of venture capital, should they care about sustainability and value creation.