Integration of ESG into our Investment Process

We’re on a mission to back founders that embrace the unconventional. We’ve learned that it's those with a fresh perspective on the future who write it.

But we also believe that the future will be built by companies who have the dedication, determination and drive to build a better world, and that entrepreneurs are best placed to solve the world’s most pressing problems. We look to invest in companies that not only drive potential financial returns but also benefit the society that we live in.
Venture capital firms play a pivotal role in funding the companies seeking to make real change in society. So, we incorporate environmental, social and governance (ESG) diligence into everything that we do. We want to back the companies who are going to address some of the most pervasive issues that society faces.

— ESG in our investment strategy

For too long has venture been focused solely on financial returns. Needless to say, these are still important: we wouldn’t have the funding to back the companies of the future without these returns. But why shouldn’t we discuss D&I policies in board meetings in the same way that we talk about retention metrics? There needs to be a shift in mentality that ESG isn’t secondary to profit, but it works in tandem with it: the reality today is that returns to society and financial returns need not be mutually exclusive. While we back some companies where areas of ESG are absolutely intrinsic to their mission, good ESG practices can, and should be, integrated across every single business. And let’s be honest – it’s much easier to build a company from the ground up with ESG in mind, rather than integrating it later as an afterthought.

There’s a lot of greenwashing around ESG in the industry at the moment, but ESG is not a tickbox exercise for Talis. We want to set a precedent for the way VC funds implement ESG practices internally, and we take an active position in how our portfolio companies approach ESG, striving for our portfolio to be the best in the game.

That being said – we don’t expect our portfolio companies to have everything in place at the time that we invest, particularly in the very early stages. What we want to do is provide the foundations for an open conversation of where companies are at now, where they want to be in the coming years – and crucially, how we can help them get there. Given the sector diversity of the companies in our portfolio, and the fact that we invest from seed to Series B, the guidance we give one company is different to the next.

Our ESG policy outlines ESG diligence within our investment strategy, as well as how ESG integrates within our business operations and the support we provide to portfolio companies.

Talis’ ESG framework.

We have developed a Six Pillars Framework to identify ESG risks, which is aligned with the United Nations Sustainable Development Goals and the United Nations Global Compact. We’re a member of the ESG in VC group led by LSE and Houghton Ventures: we crafted the Six Pillars Framework in line with their recommendation to identify material issues relevant to early-stage start-ups. The Six Pillars Frameworks includes environmental impact & climate change; sustainable supply chains; diversity & inclusion; employee safety; health and wellbeing; strong governance & ethical business standards, and responsible product design & data.

ESG diligence in the investment process.

From 2021 we have developed a comprehensive ESG diligence process, which works in three stages

Pre-investment: The first step in this process is when we meet a new company, we screen them through our negative exclusions list, which is largely based on the IFC’s exclusion list.

The second stage is the pre-investment ESG risk assessment, which is included in the investment memorandum. This is a standardised Q&A which covers essential questions relating to our Six Pillars framework, which includes environmental impact & climate change; sustainable supply chains; diversity & inclusion; employee safety; health and wellbeing; strong governance & ethical business standards, and responsible product design & data. Our investment team identifies areas where greater ESG due diligence is needed and presents this to the fund’s Investment Committee. When ESG risks are too great and cannot be rectified in a reasonable timeframe, no investment is made.

Once our IC has approved and the term sheet has been accepted, we undergo a much more intensive ESG due diligence process. This has been developed in line with the ESG-for-VC Framework, with supplementation from SASB for industry-specific metrics, but the six pillars of the ESG framework remain the same.

Post-investment: We work closely with our portfolio on dedicated projects to improve ESG practices within their companies. The core areas for improvement will be flagged in the post-term sheet ESG questionnaire and companies can opt-in to ask for support on a range of issues in this questionnaire, including topics like increasing gender diversity, tracking carbon emissions or building a sustainable supply chain.

We then follow up with our portfolio companies every year with the ESG questionnaire to track progress, and we gather metrics annually to be collated for our annual ESG Impact Report which we’re launching this year, and we will report to our LPs on an annual basis.

ESG practices as a fund

We maintain ESG governance within our firm’s operations. Our dedicated D&I Working Group and our ESG Taskforce are comprised of individuals from the investment, finance, marketing and operations teams. The ESG Taskforce is led by our ESG Impact Officer Serena Taylor who is responsible for overseeing the integration of our ESG strategy as a fund and within our portfolio companies.
We undergo a carbon balancing project annually with the World Land Trust, an international conservation charity that protects the most biologically significant and threatened habitats in the world. Our new remote working policy, which is a hybrid model, will reduce our carbon emissions from commuting. We’ve also implemented the Cycle To Work scheme, enabling employees to further reduce their emissions when attending the office.
The D&I working group is dedicated to ensuring that our practices are as inclusive as possible. At Talis, we are acutely aware that discrimination of all forms is deeply entrenched in our society; we are also aware that the tech and venture communities suffer from a lack of diversity disproportionately. We’re constantly looking for ways to ensure that access to guidance and funding is as fair as possible, as well as ensuring that opportunities to work at Talis are equal:

  • We’ve committed to improving fund diversity, including undergoing unconscious bias training and becoming certified by the DiversityVC Standard
  • From 2021 we will track key ESG metrics within our portfolio companies, reporting these metrics to LPs and publishing them on an annual basis
  • We’re improving dealflow diversity through our Office Hours sessions, which are held specifically for certain underrepresented groups. The aim of these sessions is to level the playing field for founders, and we hold these sessions in partnership with organisations like OneTech
  • We’ve published a cold-outreach form on our website for any founder to pitch their idea to us; we aim to respond or meet with every single founder who approaches us
  • We partner with LaunchIt, acting as mentors to help the next generation of young entrepreneurs launch and succeed in their business ventures
  • We commit to annual CSR, supporting causes that align with our investment thesis as well as core areas of ESG, like the World Land Trust
  • We host interns annually from FutureVC and 10,000 Black Interns to give opportunities to underrepresented candidates to work in VC
  • We’re revamping our hiring process to remove bias, as well as reaching beyond our traditional networks to advertise roles at the company
  • We’ve published our D&I statement, include a zero-tolerance policy on our term sheets and we’ve joined industry movements like #MovingForward to promote inclusive and equitable startup fundraising
  • We’ve signed up to Act One Ventures’ diversity rider, committing to promoting inclusivity and diversity of investors that we co-invest with
  • We revamped our paternity leave policies to extend well beyond the statutory requirements for both prospective mothers and fathers

Mental health support is also one of Talis’ core priorities. We provide a mental health subsidy to our employees, as well as providing a mental health support programme to our founders, which thus far has included mental health in the workplace training, and will next include access to one-on-one guidance such as coaching, therapy and counselling.