Why did I embrace the Impact Investment Industry & ESG factors?

Image from Andrea Piacquadio in Pexels.

In my last year in Brazil - the world's most fascinating emerging economy (can't help it, I'm a fan) - I had the opportunity to support small businesses run by underserved founders. I remember how difficult it was for entrepreneurs to free themselves from the limits of access to credit, qualified information, and network. Businesses involving innovation or technology had even higher barriers to entry.

According to SEBRAE data from 2022, 90% of founders work alone and 45% earn the equivalent of about U$ 250 per month. 34% of them are women, and 52% are black. The field experience I had changed my way of seeing the business environment in Brazil. Rather than glamour, real entrepreneurship is all about hard work and an apparently insane resolve.

My big surprise, when I left the country, was to discover that the world data show similar disparities. According to Village Capital, less than 15% of global venture capital goes to female-founded businesses; less than 2% of US venture capital goes to Black or Latin founders, and more than 50% of global Venture Capital investment is basically concentrated in three (out of 50) US states: NY, MA, and CA.

Seeing the scale of the problem, I decided to embrace the impact investing industry and ESG factors. After all, what good is the effervescence of the startups and entrepreneurship ecosystem if the allocation of capital contributes to the continuous increase in inequalities? Accelerators, incubators, PE, and venture capital funds are multiplying all over but it is important that the outcome of this expansion leaves the world better than before.

I really understand the part of the market that has certain reservations about the topic (after all, historically, bearing socio-environmental costs is a role of governments, not investors). The problem though is that the world has changed - as it has the mainstream thinking. According to Nasdaq, Gen Z and Millennials combined account for 49% of the global population. And their (our) points of view tend to reshape investment strategies.

There are many challenges in areas such as health, food safety, education, and climate change, for example, where both founders and investors are greatly wanted. Along with that, more and more people and organizations are awaking to the possible path that combines investments and socio-environmental impact.