The politicization of ESG

Also: New Q3 data for US VC activity; Global markets continue to see headwinds following September sell-off; Crypto takeaways from our senior analyst.

Read online | Don't want to receive these emails? Manage your subscription. Log in The Research Pitch October 8, 2022 Presented by Plante Moran New Q3 VC data! The US venture market trudged through last quarter, as deal value hit a nine-quarter low even as deal count remained healthy. Exit activity remained lethargic, as combined exit value recorded its lowest total since Q4 2016. Our Q3 PitchBook-NVCA Venture Monitor comes out next week, but to give you early access, we've published key high-level datasets across US VC dealmaking, valuations, exits, fundraising, and more: Download the data   Sustainable investment survey shows clear politicization of ESG Our 2022 Sustainable Investment Survey attracted a record number of respondents—up nearly 20% over 2021—with allocators, asset managers, and service providers weighing in on ESG and Impact investing. The increase in respondents appears to be at least partially attributable to a wave of individuals who, to put it politely, are skeptical of the merits of these topic areas. Looking strictly at how the proportions have shifted from 2021 to 2022, a casual glance would indicate that there has been a drop-off in support for sustainable investing.   Click to get the data from our sustainable investment survey. In 2021, only 9% of respondents said they have no plans to incorporate any sustainable investment work. That number jumped to 13% this year. When allocators were asked if they evaluate a fund manager's implementation of an ESG risk factor framework as part of their due diligence process, 22% said they have no plans to do so—up from 15% last year. So, are the numbers of anti-ESG individuals truly growing? Are they convincing last year's supporters to shift? I have my doubts. Even going back to the first of these reports two years ago, I suspected that those who had taken the time to respond to this lengthy survey were those passionate or positively interested in learning more about the subject. We now appear to be attracting a broader audience to our survey as those supporting anti-ESG initiatives, particularly in the US, feel compelled to register their views when they might have skipped the survey in years past. Our North American LPs, in particular, grew their proportionate representation in the negative camp, but in absolute numbers, those in the highly positive camp have also grown in our survey responses. Attempting to represent various sides of the debate, as many look for a survey to do, we have always included quotes that represent both positive and negative thoughts about the sustainable investment landscape. This year, we had a much greater selection of negative open-ended responses to choose from. In 2020, one person felt the need to register extremely negative views on the topic. This year, there were roughly 50 who did so. But in terms of overall responses, these are still a minority who are becoming more vocal. I do not believe that this survey shows an indictment of sustainable investing. The numbers show continued support for the topic, even in the face of a pandemic, social movements, and financial stresses. The negative views expressed were often stated in repetitive soundbites, not reasoned arguments. This leaves hope for those with a deeper understanding of the movement that education might sway those who believe it is all—to use the words of some of our respondents—just a bunch of woke socialistic virtue signaling. To see the full survey data and our analysis, click to download our 2022 Sustainable Investment Survey.   Best, Hilary Wiek, CFA, CAIA Lead Analyst, Fund Strategies & Sustainable Investing Share:   Market Updates   Global markets continue to see headwinds as inflation-fighting central banks deal with volatility and contradictory fiscal policy, leading to a bumpy ride for foreign exchange markets. Investors looking for stability are struggling to find havens. Global bond indexes sold off along with equities and commodities during September. Entering Q4, recession fears have tightened their grip on markets, placing central bank reactions to the current environment at top of mind. Our latest Global Markets Snapshot breaks down a month of trends in the equity, debt, and commodities markets, tracking returns across a range of indexes and sectors: get the free report     Thematic Research   Reactions from Mainnet 2022 Developers are buckling down on quality amid a crypto winter. New York City—which is quickly earning its title as the crypto capital of the world—recently hosted Mainnet, a conference for crypto investors, developers, and entrepreneurs.   Our senior analyst Robert Le was there and compiled his key takeaways: With capital tightening, particularly from VCs, many crypto projects are focusing on building real use cases, attracting long-term users, and following prudent business practices—aspects that were largely absent during the last bull market. Companies working to secure cross-chain bridges—one of the most vulnerable aspects of crypto infrastructure—are attracting VC dollars. While the idea of an "ethereum killer" has mostly faded over the past year, which company will emerge as the second-most dominant L1 player remains unclear. read the free research     Webinars & Events   A few upcoming events: Oct. 18—Join our fireside chat with fintech policy analysts Ryan Schoen and John Sonsalla on what to expect from policymakers in 2022 and beyond. Register here. Oct. 20—Join us as we discuss best practices for managing cash flow forecasting. We'll touch on setting commitment schedules and how to think about liquidity needs due to uncalled commitments. Register here. Nov. 2—We're co-sponsoring and will be participating in the Intelligent Applications Summit 2022 in Seattle. The event will bring together leaders who are building and enabling intelligent applications in the business and life science sectors. To request an invitation, click here for more details.   In the News   Our insights and data featured in the press: While 2022 has been challenging, last year's exceptional performance for VC was bound to come back down to earth at some point: "I think it's still getting lost that 2021 was such an outlier year." [Institutional Investor] The US venture capital slowdown doesn't look that bad. [TechCrunch+] Private markets are worth more than typical yardsticks indicate, and they're growing more quickly than public markets. [CIO] A list of influential women atop highly valued startups, based on PitchBook valuations data. [Fortune] If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.   ICYMI   Highlights from our other recent research: Market updates Quantitative Perspectives: US Market Insights Global Private Debt Report US PE Middle Market Report Greater China Venture Report UK & Ireland Private Capital Breakdown Thematic research Down Rounds, Impacts, and Exit Opportunities Walmart, Amazon, and CVS Make Waves in Healthcare Services Postcombustion Carbon Removal Serial Entrepreneurs Raise More Capital, but at What Cost? Subsector and Startup Profile: Real Estate Tokenization + Lofty Emerging Technology Research Internet of Things Supply Chain Tech Carbon & Emissions Tech AI & Machine Learning Insurtech Coming next week (subject to change) PitchBook-NVCA Venture Monitor US PE Breakdown PitchBook Benchmarks Fintech Public Company Valuation Guide   A message from Plante Moran   The deal is done. Now, how do you plan to create and maximize value? In today’s competitive private equity landscape, successful PE firms are strategizing to drive growth well beyond the transaction. A “long game” plan for value creation post-acquisition is essential to meeting growth goals and achieving higher returns — the sooner you start, the more you’ll increase ROI. Plante Moran experts understand what’s at stake; from day-one accounting and tax planning, to optimizing technology and operations for a smooth integration, they’ll help kickstart value creation before — and after — deal-close. Innovative firms rely on Plante Moran’s practical, proven expertise every day. Find out how it can help you make the most of your investment. Learn more Share:   Thanks for reading! Feel free to email us any time with feedback, questions, or tips! Learn more about the PitchBook Institutional Research Group, meet our analysts, or access our research libraries for clients and non-clients. Were you forwarded this newsletter? Sign up at pitchbook.com/subscribe.   Since yesterday, the PitchBook Platform added: 472 Deals 1987 People 506 Companies 18 Funds See what our data software can do   About PitchBook | Terms of use | Advertise with us | Contact Follow us: This email was sent to pitchbook@quicklydone.com via the PitchBook Platform. Do you want to change your email address, get a different edition or unsubscribe? Manage your subscription here. © 2022 PitchBook. Win what's next. All rights reserved.