Indonesia-focused venture capital firm East Ventures sees ESG as an important aspect in doing business and the firm applies ESG from the lens of risk management while ensuring its investments and operations drive positive impacts and outcomes, according to its Partner Avina Sugiarto.
“Since its inception, impact considerations have always been in East Ventures’ DNA. We believe that ESG is an important aspect in doing business, and we apply ESG from the lens of risk management and also ensure we drive positive impacts and outcomes brought by our investments and operation,” she shared in a TechNode Global Q&A. “We believe sustainability can be achieved when three pillars: economic, social and environment are well managed.”
A winner of the Outstanding Ecosystem Leader: Venture Visionaries of the ORIGIN Innovation Awards 2022, East Ventures is a sector-agnostic venture capital firm headquartered in Singapore.
Founded in 2009, East Ventures has transformed into a holistic platform that provides multi-stage investment, including Seed and Growth for over 250 tech companies in Southeast Asia. Earlier this year, East Ventures closed its latest series of funds which consists of $550 million in total. Currently, it is managing more than $1 billion of Asset Under Management (AUM).
Avina, who is also in charge of integrating ESG practices into East Ventures’ investments to drive an inclusive and sustainable future, also shared her views on the importance of ESG in today’s business world, and challenges in sustainable innovation, among others.
Below are the edited excerpts:
How important is ESG in doing business today? What differentiates ESG simply for compliance with doing ESG with the aim of true sustainability?
At East Ventures, since its inception, impact considerations have always been in East Ventures’ DNA. We believe that ESG is an important aspect in doing business, and we apply ESG from the lens of risk management and also ensuring we drive positive impacts and outcomes brought by our investments and operation. We believe sustainability can be achieved when three pillars: economic, social and environment are well managed.
Our very first investment in 2009 was in Tokopedia which enables MSMEs across Indonesia to expand their market reach, Ruangguru, which enables access to quality education, and many others. Enablement of economic growth and prosperity is evident in many of our investee companies’ business models to provide better access, more affordable products, and services via technology.
As we grow, our efforts focus on a more prosperous society and the future conditions and sustainability of our planet. This is evident in our investments in Xurya, a renewable energy company platform, and Treedots, a social commerce platform that connects suppliers and purchasers on excess food supply, thereby reducing food waste, as well as our investments in companies such as Waste4Change in the waste management and circular economy.
What role does a VC play in catalyzing or accelerating ESG adoption by investors and businesses?
East Ventures is taking tangible steps toward catalyzing and accelerating ESG adoption for a more sustainable future by aligning the investment processes with environmental, social, and corporate governance (ESG) and sustainability best practices. As the first venture capital in Indonesia to sign the Principles for Responsible Investment supported by United Nations (UN PRI), we take a deliberate approach to incorporating ESG considerations in our investments process and decision-making, from screening, due diligence, investment decisions, and monitoring, to exit. Our ESG policy and processes are aligned with the International Finance Corporation (IFC) Performance Standards. We have also set up a dedicated ESG team to work with and guide its portfolio companies and work on capacity building and stewardship in our ecosystem and all stakeholders.
Climate change and social inequality have been pressing issues in our generation. We believe ESG and sustainability are part of how we create value for our investors and stakeholders. We believe strong ESG propositions can help start-ups to win customers, attract and retain talents, and expand market reach by offering sustainable products & services, and solutions for a more sustainable planet and society for many generations to come.
Define impact. How do you innovate with impact in mind?
The way we see impact is aligned with one of our two-pronged approaches, which is Doing Good, whereby we aim to align our portfolios to the United Nations’ Sustainable Development Goals.
The way founders think at the ideation stage is about addressing a big problem faced by society, whether it relates to access, financial inclusion, employment, education, health, environmental issues, and many more.
What are the three (3) key challenges in sustainable innovation? How is venture capital able to address these challenges?
There are various challenges, but I’ll address a few key ones from the digital perspective:
Digital inclusion. Initially, the digital penetration and literacy have primarily been in the larger cities, however as digital infrastructure is being developed, we believe it’s important to also serve the rural areas as wellEast Ventures have conducted annual research together with PWC and Katadata called East Ventures – Digital Competitiveness Index (EV-DCI), whereby we annually map out the digital competitiveness across 34 regions in Indonesia and take into account perspectives from government officials and business leaders. We believe in keeping up this progress, which requires hand-in-hand support from all the parties, including the government and business players.
Scale. Many think that sustainability demands premium pricing, which may make it more difficult to scale. However, we believe the important solutions are innovations that, when scaled up, are able to lower the cost, improve yield and efficiency and hence compete with incumbent solutions. To support this initiative, East Ventures has signed an MOU to work with the Indonesia Chamber of Commerce (KADIN) Net Zero Hub and World Resource Institute Indonesia, a founding member of the Science Based Target Initiatives (SBTi) to collaborate on scaling up innovative solutions in various climate solution verticals for businesses and countries.
Funding. For climate tech solutions in Southeast Asia in particular, the funding option is still limited. Hence, as a VC we’re working on committing further resources to invest in climate solutions such as waste management, sustainable food and agriculture, renewable energy, urban and mobility solutions. We have also ensured, through capacity-building initiatives, that our investment teams are trained on ESG & impact practices and toolkits to be able to help screen potential opportunities and grow with existing portfolios.
Please share any case studies, success stories, data, or industry insights that can highlight these.
East Ventures is the first venture capital firm in Indonesia to sign the Principles for Responsible Investment by United Nations. Per our Sustainability Report, East Ventures’ ecosystem has contributed to 16 out of 17 Sustainable Development Goals by the United Nations.
In relation to diversity, early this year, we have launched the Women with Impact program to empower more women in tech and investment industries. We have three main goals in mind:
- To create a more inclusive and diverse workplace;
- To facilitate the networking and sharing opportunities with female founders and investors;
- To support more women to rise to leadership and decision-making role.
Given the current gender gap, we believe that both men and women play an important and equal role in driving more sustainable innovation. We have also invested in a number of companies that have provided strong returns and impacts to the society. Our investment in Aruna, a sustainable e-fishery platform has helped introduce transparency into the trade and helps to improve fishers’ livelihoods. Aruna’s platform has helped over 29,000 fishers achieve a three to twelve-fold increase in income while employing more environmentally sustainable fishing practices.
Another company we’ve invested in is Kudo, which works with agents, or digital entrepreneurs, to provide gateways for unbanked customers to participate in Indonesia’s digital ecosystem. Kudo’s platform allows MSMEs to offer their products and services online and its extensive agent network stretches to Indonesia’s remote towns and rural areas, enabling customers to transact online for the first time. On top of positive social impact, East Ventures’ investment in Kudo has been able to generate significant returns, when Kudo was acquired by Grab and became an integral part of Grab’s strategy to further expand across Indonesia.
This TechNode Global Q&A is part of the ORIGIN Innovation Awards 2022 series. East Ventures is a winner of the Outstanding Ecosystem Leader: Venture Visionaries award.
ORIGIN Innovation Awards 2022 winners: Outstanding Ecosystem Leaders