Investors Who See with Sustainability's Eyes

Luis Bermejo, Co-founder & Managing Partner, Alaya Capital

We understand that the  companies operate  in a broader context  and have an impact  on the communities  where they are  active. However, we cannot leave the  mission of reconstructing the world in  the impact startups’ hands. We should  consider sustainability in business activity  as a responsibility of very actor of the  ecosystem. 

From the beginning, we have  observed that startups are generally  created with an impact purpose, which  is driven by the motivation of solving  problems through technology. Thus,  for the startups, it is more naturally  presented the idea of thinking of an  “impact purpose”. One of the most  commonly used theoretical frameworks  to understand the impact are the UN  Sustainable Development Goals, where  startups can find how their innovations  impact on the protection of the  environment or on people’s life quality in  the medium and long term. 

For example, Betterly is the first  social unicorn in Latin America, a  platform that delivers benefits and Life  Insurance, free of charge for companies’  workers. Up to now, they have delivered  400 million dollars on financial coverage  for 30,000 team members of 205  companies.

In this way, they help achieve  the SDG 8, which seeks to protect the  labor rights and promote a safe and secure  working environment for all workers  and the SDG 10, which seeks to reduce  inequality and to adopt mainly fiscal,  wage, and social safety policies in order  to progressively reach equality. 

"While it has been long talked about  impact startups and good sustainability  practices, we currently have the  responsibility as investors to use  these criteria as a way to evaluate  their investments. The effects caused  by the pandemic, the social gaps and  the climate crisis clearly show that  companies of the future should consider  this scenario and hopefully, be part of  the change "

But the debate has been expanded and  the world of startups has taken a concept  which has been in the corporate world for  years: the ESG principles (environmental,  social & governance). They refer to  the way companies’ practices influence  the environment, society and the  organization’s transparency, considering  their relationship with every actor with  which they interact (clients, workers,  suppliers, investors, etc.) Thus, we  can say that we have taken one step  forward as regards the debate over the  sustainability of startups. We no longer  ask them to change the world just with  technology, but also with responsibility  and making sure to have good practices in  the three ESG dimensions. 

But, why did it take so long for this  concept to arrive? Because it was believed  that startups had a small structure and that  their ESG impact would not be of much  importance. 

With the boom of startups as  source of innovation and the increase on  the available investments for them, today,  startups have a significant structure and  they are relevant actors in the economy. 

It has been proven that if a company  is created with good ESG practices, they  can adapt to changes in their surroundings  and they can find better opportunities in  it. However, if they are detrimental to the  earth or to the people living in it, the longterm  risks are high and their profitability  will be lower. 

In Ayala Capital, we started to walk  through this path, with the creation of  our third fund. And today, we consider  ourselves an impact-driven fund, because  we believe that the best way to conduct  good businesses in the long term, is to  encourage positive impact. This is why,  we invest in impact startups (that develop  solutions to face the environmental and  social challenges) and in sustainability  startups (that, even though they do  not have an impact purpose, they are  responsible as regards to the ESG  principles). This idea is carried out  throughout all our investment process: it  takes part in the research of the startups  for investment, in our decisions and in the  management of these principles, once it  enters our portfolio. 

We are convinced that sustainability  is the only way to do businesses at present  and in the future. We are invited to satisfy  the current needs, while not undermining  future generations’ capacities.