Early-stage investors are rewarding startups with strong sustainability credentials, according to new independent research commissioned by Amazon.
UK venture capital and private equity investors say those companies can command a 15 per cent valuation premium, demonstrating the opportunity for entrepreneurs who are building more sustainable products and businesses. Startups with a poor sustainability track record could see their valuation reduce by up to 4 per cent.
In the past 12 months, more than two-thirds of investors have requested more details about the sustainability credentials of startups they are investing in, citing personal values and their own organisation’s ESG (Environmental, Sustainability and Governance) commitments as driving factors.
More than half have declined a startup investment opportunity in the past 12 months due to concerns about a company’s sustainability credentials. When asked about what startups are lacking, investors cite concerns about the sustainability of their logistics throughout the supply chain and responsible waste management processes.
Seven in 10 also say the volume of current and upcoming ESG regulation is deterring them from investing in startups focused on sustainability. To take the next step, the vast majority of investors say startups need better support to embed environmentally-sustainable practices, and 83 per cent say that over half of startups they see lack the right technology and know-how to operate more sustainably.
This research comes as Amazon and EIT Climate-KIC, Europe’s leading climate innovation hub, and WRAP, a leading UK climate action NGO, announce the 16 startups joining the second edition of the Amazon Sustainability Accelerator, following more than 1,500 applications.
“Today’s research highlights the clear premium given to businesses with strong sustainability credentials and illustrates how environmental impact is increasingly guiding investment decisions, as investors seek out solutions to address today’s climate and waste challenges,” said John Boumphrey, UK Country Manager. “The Amazon Sustainability Accelerator is the ideal launchpad for high-potential startups, and we are proud to be helping a second cohort of founders scale their businesses to deliver innovative technologies and sustainable products.”
The two cohorts in the Accelerator include startups who are creating more sustainable consumer products and, for the first time this year, startups developing the technology to help businesses recycle products more effectively and efficiently. They were selected by a panel of experts in the venture capital and sustainability communities, and include:
Oscar Morgan, Co-Founder and CEO of BO Mobility, a scooter company building efficient commuter vehicles said: “We’re disrupting a fundamental pillar of society – transportation. BO’s ambition is to accelerate a future in which the best way to cross your city is also the most sustainable. The Amazon Sustainability Accelerator gets this through and through. We’re proud to be amongst such a forward-thinking startups.”
By equipping emerging startups with the tools to measure their climate mitigation, potential and supporting their capacity to think systemically, we can foster a critical cultural shift in business mindsets
Another was Martin Holicky, Co-Founder and CEO, Matoha Instrumentation (pictured top) a company involved in material identification devices that help with efficient waste sorting.
“Fundraising is hard as a startup and it’s an issue we continue to face. We were drawn to Amazon’s Sustainability Accelerator because it recognises the value of our product and what it can do for the planet,” he said.
Dr. Kirsten Dunlop, Chief Executive Officer, EIT Climate-KIC said investors are increasingly making decisions based on impact data, which is an important signal to businesses to embrace an active role in societal transformation.
She added: “By equipping emerging startups with the tools to measure their climate mitigation, potential and supporting their capacity to think systemically, we can foster a critical cultural shift in business mindsets, while helping to build the robust data that can direct investments to transformative and scalable climate solutions.”
Harriet Lamb, CEO, WRAP, said:“We are proud to support these early-stage sustainability innovators as they scale their businesses. We need pioneering product development and new approaches to recycling infrastructure as we seek to shift away from our wasteful world. WRAP is thrilled to be part of the accelerator seeking to increase investment in recycling technology and the products of the future, helping to drive advancements in the recycling sector, discovering and supporting cutting edge solutions.”
The Amazon Sustainability Accelerator is a 12-week bespoke programme designed to help founders navigate the challenges of starting and scaling a sustainable business. It will include expert-led virtual and in-person workshops, specialised mentorship, a tailored curriculum, and access to a network of like-minded founders. Amazon and EIT Climate-KIC will work in collaboration to guide Accelerator participants through a Climate Impact Forecast where they will assess their business’ climate impact, and develop strategies to improve their environmental footprint.