Our Perspective on Responsible Investment, Sustainability, ESG and Impact

1. Dutch Founders Fund

Dutch Founders Fund (DFF) is a venture capital firm.

This world is unfairly distributed & we have limited resources. We, as a society, need to become more efficient and fair. We, as a movement, believe that disruptive tech companies are an important enabler for humanity to become better at this. We want to help in this development with our knowledge, network, coaching, and capital.

The world needs disruptive thinking and business models to solve the biggest problems we have as human-kind. We believe tech is a major enabler of that.

We know it’s hard to build companies, that’s why we build a community that helps founders who are tackling bigger societal problems with their companies that are agents of change to accelerate growth. We formed a network and our fund in which we give advice and experience, but also capital to those players we believe can accelerate this change and have a sustainable impact on the benefit of the world and build a sustainable company.

The world needs disruptive thinking and business models to solve the biggest problems we have as human-kind. Therefore, we like to challenge conventional wisdom, in business and in ESG.

2. Responsible Investment, Sustainability, ESG and Impact

In the last few years these terms have become increasingly more important in the VC environment. Although concepts like responsible investment, sustainability and ESG have become the new talk of town, we feel like they have always been part of the venture capital's toolkit.

It complicates things a bit that these concepts are often used interchangeably. Therefore, we feel it's useful to clarify what these terms mean to DFF, which is why we have developed this document.

“ESG” may refer to ESG integration at DFF (described further below), but is also used by DFF as an umbrella term to refer to the combined Responsible Investment, Sustainability and Impact practices.

In all that we do as it relates to Responsible Investment, Sustainability, ESG and Impact, we try to have clarity on the objective, whether this is:

  • to align investments with our values,

    1. Keepin’ it simple & transparent.
    Tackling complex industries through simplicity is an art many seek but few master. We are here for it.

    2. Equal distribution.
    We believe that everyone should be able to get a slice of the pie. Reimagining the value chain through rerouting supply and demand is a great start.

    We believe that everyone should be able to get a slice of the pie. Reimagining the value chain through rerouting supply and demand is a great start.

    3. Sharing knowledge.
    Knowledge sharing sits at the heart of DFF. The vast experience of our team, advisors and founder network is key for growth. Why spend time reinventing the wheel while you can optimize/innovate it?
  • to achieve better financial performance or better manage investment risk,
  • to contribute to society by solving societal problems, or-
  • a combination of these objectives.

3. Responsible Investment

To us, responsible investment means being an active investor: Active Ownership. In addition, Responsible Investment includes ESG integration: taking into account environmental, social and governance factors in the selection and monitoring of our portfolio companies.

a. Active Ownership
We believe that investors have an incredibly important role to play in the development and governance of a start-up. DFF has:

  • direct and formal involvement, e.g. through joining portfolio company boards or voting our shares; and
  • indirect and informal involvement, e.g. by acting as role models to founders, being accessible to founders and making available our entrepreneurial expertise and networks, and by signaling to the VC landscape that the portfolio companies meet our rigorous due diligence and selection standards and therefore will benefit from being part of the DFF community.

ESG considerations are included in our active ownership practices: in our engagement with portfolio companies we will discuss ESG considerations, when relevant to the company strategy and activities, or where the portfolio company or other relevant stakeholders request it.

b. ESG integration
We take into account environmental, social and governance factors in the selection and monitoring of our portfolio companies.

After making an investment in a company we take a customized approach to ESG integration: we challenge management to think about specific ESG issues and determine to 3 what extent they can impact their business, in a positive or negative way. In certain situations, we will ask management to develop a policy, or “perspective” on a certain ESG issue. This can also be in a later stage when companies enter new growth phases.

The ESG topics that are most often material to DFF are the following:

  • Environmental: carbon emissions, energy use; pollution & waste
  • Social: diversity, especially cognitive diversity
  • Governance: transparency, most aspects of corporate governance have always been core to VC investing even before it was included in “ESG'', therefore it receives significant attention during our due diligence process.

Our portfolio company Govin offers a tool that allows other portfolio companies to obtain and provide clarity on the applicable corporate governance through a simple dashboard. The tool will be used by the management team, supervisory board members and rest of shareholders and enables efficient collaboration to support long term value creation. This tool is crucial for our active ownership and ESG integration practices.

We feel we cannot determine a priori which companies or businesses we will not invest in due to moral or ethical considerations; in our experience this is mostly situation-specific. Therefore DFF does not maintain an exclusion list or divestment policy. Sometimes we are introduced to an investment opportunity that makes us question if it is the type of business DFF wants to be associated with; when that happens we discuss the moral aspects of the business and sometimes this leads to a decision not to pursue the investment, even if it might otherwise be attractive from a financial point of view. These cases are documented and can be shared with stakeholders at request.

4. Sustainability at DFF

At DFF we feel we can make the most difference, whether the objective is values-alignment, financial performance or Impact, through our investments, i.e. through the selection of and support given to our portfolio companies.

Having said this, we want to take responsibility for the ESG issues we can control directly, for our relatively small team and organization. The ESG issues that are most important to DFF are:

  • Environmental: energy use and travel. Today, our footprint in this area is already small: we use office space in one of the most energy-efficient buildings in Amsterdam; our international travel is limited and most travel in the Netherlands is by bicycle or public transport.
  • Social: diversity, especially cognitive diversity. We aim for our team and organization to be a reflection of Dutch society in terms of gender, ethnic and socio-cultural make-up. We also value cognitive diversity, or diversity of thought, which means bringing together a range of different styles of thinking among members of our team (relevant factors here include different perspectives, abilities, knowledge, attitudes, information styles, and demographic characteristics). We also believe that 4 cognitive diversity, in particular, can contribute to better decision-making and business outcomes.
  • Governance: all aspects of good governance are crucial to DFF. Good governance, to DFF, means putting in place the right people, processes and practices that will produce the investment results that meet the needs of our investors and society. Furthermore, we recognize and will uphold the following principles of good governance: transparency; participation; responsibility and accountability; effectiveness and efficiency; and moral integrity. Finally, in our view, “two heads are better than one”, which means that wherever possible we will aim to involve other stakeholders and experts in fulfilling our governance duties

5. Impact

We define “Impact” as the positive social or environmental consequences that our portfolio companies may have. Even Though Impact is a funny concept by design, we recognize theSustainable Development Goals (SDGs) as a useful framework in terms of assessing if a business activity is impactful or not.

DFF does not intend to be positioned as an “Impact fund”. Having said this,

  • We recognize that many of our portfolio companies have Impact: businesses, marketplaces and technologies can play a role in solving the world’s many challenges. Where there are claims of Impact we want to dig deeper and understand the underlying theory of change.
  • We also recognize the concept of “additionality”: when our investments allow things to happen that would otherwise not happen. Because we put money in the company and are not buying equity from someone else we can contribute directly to the foundation and development of the business. We believe many of our portfolio companies would not be where they are today were it not for our investment.
  • We believe in creating the right circumstances for serendipity: triggering innovation that cannot be foreseen, also where it regards Impact.

Therefore we see it as our responsibility to encourage and challenge founders and management teams to develop clarity on their business purpose and to find ways for their businesses to have (more) Impact. This is both fundamental to the strategy and business of a company but also provides a perspective on how a company can be assessed in terms of Impact.

We are also interested in contributing to the public debate about Impact investment.

Finally, we recognize the important role of governments in addressing societal problems and are willing to be involved in exploring how public-private partnerships can drive further Impact investment.

6. Principles for Responsible Investment (PRI)

We recognize and endorse the PRI principles, in particular the commitment to be active owners and to incorporate ESG considerations in active ownership practices. Having said this, DFF is not a PRI signatory – with our small size we feel the annual PRI reporting would be too onerous and not a good use of our investors’ and founders’ time and money.

We will, however, reconsider becoming a signatory to the PRI at a later date when our scale and resources allow this and if we feel joining the PRI community has significant added value for DFF.

7. Measuring & Reporting

We believe that measuring is important – what gets measured gets managed. At the same time, we recognize that many things in the start-up environment, especially those related to sustainability, ESG and impact, cannot be effectively measured. For things we cannot measure but that we believe are relevant to our investments, we develop proxies, measure ‘qualitatively’, or simply ask lots of questions.

DFF will report on its efforts, challenges and achievements in ESG on an annual basis. For this reporting, we will seek both quantitative as well as qualitative input from portfolio companies. In reporting on climate and energy related issues we will be supported by the tools offered by our portfolio firm Minimum.

The Dutch Founders Fund B.V. (“Dutch Founders”) and the portfolio companies which it advises have a mission to build a sustainable, resilient, diverse, inclusive and tech-enabled ecosystem in Europe and beyond.

This document (the “ESG Policy”) sets out Dutch Founders’s approach to investing responsibly, which includes our take on Environmental, Social, and Governance (“ESG”) issues, as well as our commitment to contribute to a better tomorrow. The policy and her implications apply to all of the funds, existing portfolio companies, new investments and Dutch Founders’s business operations. We strive to adhere to this ESG policy at all times.

Moreover, this document will serve to illustrate how our fund has implemented procedures and guidelines to meet our ESG goals and standards. 

The Dutch Founders Fund B.V. (“Dutch Founders”) and the portfolio companies which it advises have a mission to build a sustainable, resilient, diverse, inclusive and tech-enabled ecosystem in Europe and beyond.

As of this writing, Dutch Founders has stipulated the following factors in our interpretation of the ESG-standards in investing responsible:

  1. Environmental Factors: the pollution and contamination of land, air and water, and related legal and regulatory compliance; eco-efficiency; waste management; management of scarce natural resources; climate change impacts; biodiversity; and the development of new technologies, products and markets e.g. ‘green’ / sustainable products and services.
  2. Social Factors: the treatment of employees including their pay; health and safety; labour conditions; human rights; any form of discrimination, harassment or victimization; diversity and inclusion, supply chain management; the treatment of all stakeholders including customers and communities, and actively involving our direct and indirect community to built towards a sustainable society.
  3. Governance Factors: anti-bribery and corruption measures; business ethics; accountability; transparency; conflicts of interest; whistle-blowing; control mechanics; and the governance of environmental and social factors. Dutch Founders also accounts for reporting as a key Governance-factor. We vet our portfolio companies and ourselves to report diligently, with care and on time.

The abovementioned factors are by no means exhaustive and Dutch Founders will frequently revist and refine our interpretation of it.

Dutch Founders Approach to ESG

At the Dutch Founders Fund, we firmly believe that entrepreneurs are the catalysts in changing the world for the better. We know that doing good for the planet and making money are not mutually exclusive, and therefore we have set out on a mission to fund companies that create societal, financial, personal and environmental impact.

The ESG principles serve as the core of our investment rationale, purpose, norms and values. We recognise that adherence to the ESG principles might impact the success of our investments - both positive and negative. Most importantly, we also recognise the major role that venture capital funds such as ourselves play in bringing ever-lasting change in the world. We don’t just passively finance those who challenge the status quo, we deploy our experience, network and know-how to make sure that our portfolio companies are contributing to society at large. A genuine focus on doing well for their own employees, customers, suppliers, the environment, shareholders and anyone else involved is the key ingredient to success. In the end, creating long lasting value will allow everyone to reap the fruits of progress.

We actively challenge our team and our portfolio companies to abide by the highest standards. The Dutch Founders Fund strives to invest in those who rate high on our ESG-index. This means that we look for companies who use sustainability as a key value-driver.

It is important to note that our investment policy does not necessarily focus on financial products that aim to be purely sustainable investments, the so-called 'impact investments'. Neither does our fund focus on financial products with sustainable characteristics in particular, as we are often unable to adequately assess the sustainability risks and their effects on the financial results of the investments. Where we can demonstrably quantify these negative effects, we aim to take them into account in our investment decisions.

Dutch Founders’s commitment to ESG

At Dutch Founders, the ESG principles are deeply rooted in our culture and our screening process. Across the entire investment cycle, from initial assessment to due diligence, ownership and exit, we always do our utmost to ensure that the ESG factors are safeguarded. This includes the following:

  • Assuring strong ESG governance over the entire business line: Everyone at Dutch Founders Fund keeps each other informed about recent developments within the realm of ESG. We strive to involve and inform all relevant stakeholders about our ESG mandate on a constant basis. We organize seminars and have set out to provide resources for those who want to be more informed.
  • Supporting our portfolio companies on their ESG policies: We actively encourage our portfolio companies and the founders we work with to live and breathe the ESG principles. Where possible and appropriate, we will work with our portfolio companies to develop a toolkit to provide additional support on implementing best practices. We also partner with our portfolio companies on ESG related term sheet clauses. The term sheet requirements may, depending on each portfolio company, include board representation, appointment, voting, audit, fraud, reporting and financial reporting.
  • Implementing ESG in our entire investment process: As a major part of our investment process, we frequently assess and revisit investment-opportunities on their ESG-related risks. These include - but are not limited to - issues related to the environment/climate, diversity, ethics, anti-money-laundering and bribery, anti corruption, diligent and transparent reporting. We work closely together with a team of industry experts with profound knowledge of matters related to compliance and ESG to make sure that all processes are executed according to the most recent standards. Where appropriate or deemed necessary, Dutch Founders will instruct these external experts to perform additional ESG due diligence on potential portfolio companies. If the ESG risks related to a potential investment are deemed too great and/or cannot be appropriately mitigated in a reasonable timeframe, we will not continue with the investment process.
  • Creating a diverse and inclusive environment: We strongly encourage women, BIPOC, the LGBTQIA+ community, people with disabilities and other underrepresented groups to apply to our fund. Whether you seek investments or are looking for a next step in your career, the Dutch Founders Fund welcomes everyone.
  • Constant monitoring: Via the proprietary software of our portfolio company Blanco, we constantly monitor and screen all of our stakeholders on AML, anti-terrorism, source of funds and overall background.
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