PitchBook News - War's ESG dilemma for investors

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The Weekend Pitch

March 27, 2022

Presented by Masterworks

(Jorge Juan Perez/Getty Images)

The human cost of the war in Ukraine is already staggering, but it could get much worse as economic ripple effects spread.

The longer the war drags on, the more complex it makes private equity investors' duty to their LPs and other stakeholders to stay on track with their ESG commitments.

So far, efforts have mostly involved leaving Russia and cutting off money and support to Vladimir Putin's regime where possible. According to data published by the Yale School of Management, over 400 organizations have either scaled back their Russian presence or left the country entirely. The list includes asset managers like BlackRock, which has restricted Russian clients' capital market access, and advisory firms like Accenture, which has moved its operations out of the country.

While these actions are prudent from an ESG perspective, they're only short-term solutions. The war has forced the world to confront a new set of challenges, like the need for greater energy security and more investment in renewable alternatives.

These won't be tackled by knee-jerk reactions alone. It will take the kind of long-term ESG planning that has arguably been lacking until now. I'm Andrew Woodman and this is The Weekend Pitch. You can reach me at andrew.woodman@pitchbook.com or on Twitter @adwoodman.

Quote/Unquote

"A lot of venture debt is made on the assumption that the guaranteed repayment for the debt is your next equity round, but if lenders start to be a little nervous about that, they will see these opportunities differently."

—Max Wolff, a managing partner at Leste Clearway Capital, on venture debt lenders seeking tighter loan terms and smaller deal sizes amid 2022's stock market volatility.

Deal Flow

Global agtech startups generated $22.8 billion in exit value during 2021, according to PitchBook's 2021 Annual Agtech Report. That number is driven in part by 16 public listings during the year, including those by Ginkgo Bioworks, Zymergen and Caribou Biosciences.

PitchBook analysts predict that recent regulatory pushback, as well as public market volatility, may severely limit SPACS and other public listings in the near term.

Did you know ...

(Richard Drury/Getty Images)

… That international investors stepped up their exposure to VC-backed companies in China during 2021, participating in about one in five VC deals in the region?

Despite bullishness among VCs, Beijing's tightened regulations on foreign IPOs could still cause some large investors in the region to be more cautious, according to our H2 2021 Greater China Venture Report.

Datapoints

After several years of shrinking, the capital supply-and-demand ratio started to rise over the last few quarters of 2021, according to our latest VC Quantitative Perspectives Report.

As the supply of funding increases, founders are likely to have more options when searching for capital, working with partners and finding attractive deal terms—leaving some investors unprotected from downside risk.

Recommended reads

DST Global founder Yuri Milner amassed a $3.9 billion fortune. Now Silicon Valley's wealthiest Russian is carefully distancing himself from Vladimir Putin. [Bloomberg]

Landline phones are the latest analog device to be adopted as an antidote to an increasingly digital way of life. [The New York Times]

BlackRock CEO Larry Fink has been notably critical of bitcoin. Here's why he may be setting aside some of his suspicions surrounding crypto assets. [Fortune]

It took two decades to build Yandex into the giant it is today. Is Russia's largest tech company too big to fail? [Wired]

Patreon CEO Jack Conte discusses the role of the middle class in the creator economy, what the future of the industry may look like, and how he plans to keep his company relevant on its own terms. [Fast Company]

A recent fire in a California tiny-home village is raising bigger questions about housing for individuals experiencing homelessness. [Curbed]

This edition of The Weekend Pitch was written by Andrew Woodman and Priyamvada Mathur. It was edited by Alexander Davis, Angela Sams and Sam Steele.

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PitchBook News - War's ESG dilemma for investors

Quote/Unquote

Deal Flow

Did you know ...

Datapoints

Recommended reads

Older messages

Fintech startups bank record VC funding

Venture lenders rein in loan terms

VC funding hits new highs in the IoT market

Agtech harvests a strong year for VC

China's VC dealmaking resilient, uncertain

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