Amid the funding winter for the Indian startup ecosystem, investors’ focus on ESG norms (environment, social and governance) is also seen as a major reason for the slowdown in funding for new-age businesses. In addition to financial metrics, investors are now interested in sustainability, carbon reduction, and improving working conditions in companies.
please remember. Indian startups saw a decline in venture capital funding in the first quarter of 2024, especially in the technology sector. The country’s cash-strapped startups remain in third place despite facing a “funding winter”. From January this year to March, only $1.6 billion was injected into Indian startups, marking a 51% decline, according to Tracxn.
BK Sabharwal, Chairman, Capital and Commodity Markets Committee, PHDCCI, said investors are focusing on the ESG performance of startups, not just their financial viability, as they generate responsible business practices. said.
“For startups, it is more beneficial to incorporate environmental and social aspects from the planning and incubation stage in order to attract better investments. We can play a more enabling role, better manage our ecosystems and collaborate for collective action,” he said. live mint.
Shyam Menon, co-founder of Bharat Innovation Fund, said many development finance institutions and foundations were directing funds towards ESG-related investments, adding that climate change technology companies had managed to cope with the downturn in start-up funding. Ta.
Menon said the role of ESG is not limited to the mobility sector, but includes a wide range of factors relevant to businesses across all industries. This applies to industries such as energy and utilities, manufacturing, agriculture, food production, financial services, healthcare, technology, communications, and consumer goods.
“The environmental aspects of ESG extend beyond electric mobility. This includes climate change mitigation, resource conservation, water and waste management, biodiversity protection, etc. Social elements include human rights This includes issues such as , labor practices, product responsibility, and community relations.The governance aspect focuses on corporate governance practices, ethical behavior, transparency, risk management, etc.
“Governance has taken a backseat and the explosion has brought governance back into focus. This has given sustainability even more traction in the startup world.” Auxano Capital said Brijesh Damodaran, Managing Partner.
Co-founder of Bharat Innovation Fund says founders should ensure active engagement with stakeholders, employees, customers, investors and local communities for long-term sustainability. Proposed.
“Try incorporating circular economy principles early on by designing products and services that minimize waste and encourage reuse and recycling. Establish metrics and key performance indicators (KPIs) to monitor,” he added.
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