Here’s what ESG clauses in VC term sheets look like
Here’s an excerpt from this article from Sifted about ESG clauses in venture capital term sheets:
Many of the clauses ask companies to put climate, diversity and ESG policies in place in a specified timeframe after investment — usually between three months to a year. They usually also require teams to report progress to the board.
VC giant Lakestar, for example, asks companies to adopt a climate policy within 12 months of the deal closing. “By setting objectives for the first 12 months, we hope to kickstart the process, nudging our portfolio companies to integrate ESG thinking into their operations, which will ultimately benefit them in the long run,” says partner Mathias Haniel.
Some clauses can also include “best effort clauses” — encouragement for the companies to do their best to implement something. Revaia, for example, has a best-effort clause to make sure there is at least one female board member joining the board within the next six to twelve months or when someone new joins the board. Now, 90% of their portfolio has at least one female board member, up from 25% of companies before they joined the portfolio.