With our #ESGinVC initiative, we want to foster a discussion around ESG and help each other develop and improve our frameworks. As part of this initiative, we spoke to leading managers and LPs about their ESG frameworks. The long-form interviews will be published in a reader on our website, while we will regularly post interview extracts on our social media channels (Linkedin — Twitter — Medium).
The interview below is with Brian Laung Aoaeh, GP & Co-founder at REFASHIOND Ventures.
How do you tackle ESG responsibility at REFASHIOND Ventures and do you have a specific ESG framework for your investments in place?
Our focus on supply chain technology at REFASHIOND Ventures is driven by a simple belief: Human activity is causing climate change. All human activity is driven by supply chains. To solve the climate crisis, we must refashion and transform global supply chains and reverse the damage humans have caused to the natural environment. Moreover, we argue that innovations which enable sustainable supply chains to take root and scale form the basis for all other sustainability innovations.
As a result, ESG considerations are a fundamental aspect of how we think about our investments. That said, it is worth pointing out that implementing an ESG framework in a company that is still in its embryonic stages must necessarily differ from how one implements ESG in mature incumbent companies that trade on the world’s stock exchanges.
“…innovations which enable sustainable supply chains to take root and scale form the basis for all other sustainability innovations.”
At REFASHIOND, we apply our own ESG framework to assess potential investments. We have incorporated a standalone ESG section into our Investment Decision and Review Scorecard that each member of our investing team is required to complete for every investment. Altogether, the scorecard covers about 50 questions split across 5 unique but interconnected sections, which we believe are important for each person on our team to think about as we assess the startup.
You invest in companies that refashion global supply chains. What are the challenges in global supply chains that need to be solved most urgently?
The ESG Considerations section in our investment process asks our team members to assess the potential of each startup’s technology to have positive and scalable impacts on the following ESG issues: reduction in GHG emissions, reduction in the generation of material waste, reduction in water waste, increase in the creation of jobs that pay a sustainable living wage and contribute to the economic wellbeing of communities, and increase in supply chain transparency. In essence, each startup must be able to reduce the negative environmental impact of industrial supply chains in the particular industry.
The climate crisis and the choices humanity has made in designing, building, and managing supply chains are intricately linked – you can say they are opposite sides of the same coin. The intensity with which fossil fuels are consumed in the production, storage, transportation and consumption of goods is the single biggest driver of the climate crisis.
What are the most important and exciting innovations disrupting supply chains today?
Next Generation Logistics is a very important area of focus, due to the immense impact that transportation and logistics have on global GHG emissions. Data & Decision Analytics will play an increasingly important role here, making it possible for companies to use the power of computational techniques and other exponential technologies to understand how various choices in their supply chains might lead to positive or negative outcomes – at the strategic, tactical, and operating levels of each company’s organization hierarchy.
“The climate crisis and the choices humanity has made in designing, building, and managing supply chains are intricately linked…”
In our investment thesis and framework, Data & Decision Analytics marries data science, machine learning, dynamic systems, stochastic optimization, and computer simulation into easy-to-use cloud-enabled platforms that enterprises of all sizes can deploy to assist executives who have to make tough operational choices and decisions under uncertainty.
What we make and how we make it contributes significantly to the ability of industrial supply chains to meet ESG considerations and requirements. Therefore, REFASHIOND Ventures seeks investments in Advanced Materials and Advanced Manufacturing. We are especially interested in the ongoing and accelerating shift away from linear supply chains and towards circular and regenerative supply chains, or demand chains as some people refer to them.
How do you measure ESG compliance in your portfolio companies?
We are just getting started building the fund, so at this point we are focused on assessing if the startups in which we invest continue to maintain their focus on actualizing the potential positive long term ESG outcomes that could occur if they reach scalability. As I have already stated, it would be counter-productive to impose a detailed reporting and compliance framework that Pre-Seed, Seed-Stage and some Series A startups must adhere to in addition to the numerous other challenges they must confront as they seek a path to a profitable business model.
“I believe that every Climate Tech investor is really a supply chain technology investor in disguise”
At each subsequent round of financing, our team will conduct another comprehensive and bottom-up review to assess how things are evolving. As the startups mature, we will work with the other investors and the company to determine the best approach to ESG compliance.
We do not think this will be difficult, since most of the founders we meet demonstrate an innate commitment to ESG issues and contributing to solving the climate crisis. In every case, this attitude predates their conversations with REFASHIOND Ventures.
As an industry, what should venture capital do to better address ESG issues?
I believe that every Climate Tech investor is really a supply chain technology investor in disguise. So, I urge venture capitalists to work on understanding the intersection of supply chains, innovation, technology, ESG, and the climate crisis. That is the starting point, because as we said at The Worldwide Supply Chain Federation; “The past ran on supply chains. The present runs on supply chains. The future will run on supply chains. The world is a supply chain.”
About Brian Laung Aoaeh
Mr. Aoaeh is a Cofounder and General Partner of REFASHIOND Ventures, an emerging venture capital fund manager that invests in early stage supply chain technology. He co-founded The Worldwide Supply Chain Federation, and is an adjunct professor of supply chain and operations management at the Tandon School of Engineering at New York University.
About REFASHIOND Ventures
REFASHIOND Ventures is a Supply Chain Technology (#SupplyChainTech) venture capital fund that invests in early stage innovations that refashion global supply chains. The fund sources deals from The Worldwide Supply Chain Federation’s global membership, and the general partners’ wide network of professional relationships in technology, supply chain, operations, venture capital, media, financial services, and the public sector while leveraging their operating experience, and strong connections with corporations around the world as both potential investors and market-validating customers for REFASHIOND Ventures’ portfolio companies.
About Marco Cesare Solinas
Marco is an Investment Professional at Blue Future Partners. He is passionate about Technology and Venture Capital and focuses on both direct and indirect investments. Previously, he has built an international and multicultural background across Italy, US, Germany, Turkey and Malaysia.
Marco holds a CEMS Master’s in International Management and a Bachelor´s in Economics and Finance from Bocconi University.
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About Blue Future Partners
Blue Future Partners is a Fund of Funds with decades worth of experience in investing in Venture Capital. We specialize in backing Emerging Managers focused on early-stage technology investments. We are people-centric and relationship-driven. We have a global mandate and existing relationships with Emerging Managers in the US, Europe, Israel, China and South East Asia.
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