VCTs up ESG credentials

9 February 2022

The Environmental, Social and Governance aspects of venture capital trusts (VCTs) are gathering momentum among investors, says the Association of Investment Companies.

According to Nick Britton, head of intermediary communications at the AIC, VCTs are responding to demand by becoming better at measuring and reporting on their ESG credentials. For example, the Baronsmead VCTs saw a 41% rise in jobs created and filled by their portfolio companies between December 2020 and December 2021.

The companies backed by VCTs often have other ESG benefits. As an example, Britton cited Guru Sustems, a portfolio company of the Maven VCTs which has developed monitoring technology to help energy companies, housebuilders and developers reduce their carbon footprint.

There is also increasing focus on the representation of women and people from ethnic minority backgrounds among their portfolio companies. Triplepoint calculates that a quarter of its portfolio is now led by women or men from ethnic minorities, while Calculus has an all-female board of directors.

Britton says: “The G of ESG has always been important to VCT managers. A large part of what they do is getting companies ready for growth by putting better processes in place for driving strategy and decision-making.

“As investors with significant minority stakes in the companies they back, VCTs have a strong interest in improving their governance. In short, VCTs are well aligned with investor interest in ESG and the government’s ‘build back better’ and ‘levelling up’ agendas.”

VCTs performed well in 2021 against the backdrop of a global pandemic thanks to their exposure to the kind of sectors and companies that fared well such as tech, healthcare and e-commerce and this year is likely to see this success replicated, with the sector on track to set new records for fundraising, adds Britton.

Professional Paraplanner