East Ventures Announces the Implementation of ESG Aspects in Investing

East Ventures launches the "Sustainability Report 2022" to describe the impact it has successfully created – along with its ecosystem – by involving Environmental, Social, and Governance (ESG) frameworks and practices in achieving a more sustainable future and inclusive.

This report one of them is armed with more than a decade of work in collaboration with hundreds of entrepreneurs in achieving the improvement of society as a whole. claimed, East Ventures has raised more than $86 billion in annual GMV and $6,7 billion in follow-up funding.

In the last year alone, East Ventures closed more than 80 investment deals, including adding 40 new startups to its portfolio, double the previous year. All of these achievements strengthen East Ventures' leadership position to continue to make an impact and lead to sustainability.

“This is our initiative and commitment to stakeholders, providing information about the actions we have implemented and the integration of the SDGs in our portfolio. In addition, it is stated in the following movements that we will encourage together to have a good impact and a better future for the earth, people, and corporate governance," wrote the Founding Partner of East Ventures. Willson Cuaca in the report.

East Ventures Managing Partner Roderick Purwana added, in implementing ESG practices and frameworks in the investment process, his party prepared a team with global and regional experience in multi-industry. Under the Investment Committee, the group strengthens ESG leadership to oversee ESG compliance, policies, investment processes and standards.

Then, developed a Sustainable Investment Network (Sustainable Investment Network) to measure, track and improve the impact of its portfolio on the environment, economy and society. For its sustainability investment strategy, East Ventures applies two approaches – Doing Good and Avoiding Harm (Doing Good and Avoiding Harm).

Doing Good means providing and enabling its investment to grow in a sustainable market proposition to optimize impact on beneficiaries. Meanwhile, Avoiding Hazards means anticipating and mitigating risks or potential adverse social and environmental impacts on portfolio business practices.

He continued, in measuring and monitoring good deeds and avoiding harm, his party applies a responsible investment approach in the processes, standards and tools used in the investment cycle.

“There are five investment phases that we design: screening, due diligence, investment decisions, post-investment, and exit. In addition, as a signatory to the PRI (Principles for Responsible Investment), East Ventures will incorporate the six principles for responsible investment into our investment processes and daily practices,” he said.

For example, in the screening process, the team pre-screened through EST eligibility, exclusion lists, and ESG checklists related to potential portfolio companies. Then, in due diligence, the team verifies potential portfolio companies through an ESG risk assessment, questionnaire, to ensure that they are aligned with IFC's regulatory framework and performance standards. Periodically, the team tracks the progress of the sustainable impact of the portfolio through action plans and reporting and is involved in the impact creation process.

In a prospective investee's first measurement of ESG risk and management performance, East Ventures developed a Sustainable Investment Toolkit to ensure that their ESG risk management and performance meets expectations. There are four main aspects of ttoolkit These are Investment Data, ESG Questionnaire, Impact Questionnaire, and Dashboard.

"When necessary and appropriate, East Ventures' discretion will be used to seek clarification, interpret information from any queries that may be flagged, and effect positive change," the report said.

Impact through portfolio Existing

It is claimed that of the 17 goals set by the United Nations in the Sustainable Development Goals (SDGs/Global Goals), the East Ventures ecosystem has succeeded in achieving 16 goals. For example, in the realm of e-commerce, there are Aruna, TreeDots, and WarungPintar.

Aruna able to create impact for more than 20 thousand fishermen, including women, and more than 10 supported commodities to improve fishermen's livelihoods through better market access and fairer trade opportunities. As for, TreeDots managed to save 3.500 tons of food and save 13,9 billion liters of water.

Next in the realm fintech, there is ALAMI who managed to disburse $70 million in financing for 1000 MSMEs. These borrowers usually do not meet the criteria for traditional bank loans. A larger scale is shown by KoinWorks which disburses financing for 1,5 million MSMEs and disburses $50 million in financing per month.

In the realm healthtech, there is Homage which successfully operates in four countries, working with more than 8.000 caregivers, doctors and nurses to provide care to families and provide additional income for health workers. Temporary, Nalagenetics scored a growth of up to 400% in terms of increase in hospital partners in 2021 and increased 60% of Covid-19 related testing in the same period.

Of course, the process of creating this impact is full of challenges, as quoted from EV-DCI 2022, there are still many businesses that are still struggling. As such, East Ventures undertakes capacity building, including ESG-related training to portfolio companies while ensuring that East Ventures regularly discloses ESG-related impacts and progress.

“Digital innovation continues to bring positive impacts to society, and venture capitalists are becoming more careful to not only bring financial gains, but also positive impacts to society and the environment through investment, we hope to see more businesses adopting ESG policies and frameworks for measure performance and provide investors with the information they need for their decision-making,” concludes the report.

Impact investing in Indonesia

The more many investors impact who have invested in Indonesia. According to the ANGIN report in 2020, the number reached 66 investors, with details of 61 from foreign funds and five from Indonesia. Meanwhile, the number of mainstream investors who have disbursed a number of funds for the impact sector is far greater, almost twice as many as 107 investors. With details of 32 local investors and 75 investors from abroad.

The focus of each impact investor is also different. ANGIN notes that thematically, there are 10 types of impactful businesses that are their respective focus, divided into financial inclusion, forestry, clean energy, poverty, gender lens, circular economy, fisheries, climate, agriculture, and media. Each of these themes reflects the opportunities and challenges in Indonesia. This condition is very much different from the conditions in 2013.

Even in measuring the resulting impact, each investor has their own formula. Partners of Patamar Capital Dondi Hananto tell how metrics and scalability impact investing in Indonesia in general. He took the example of social impacts, according to him until now there is no one-size-fits-all metric (one for all) which can be used to measure business growth, both equity and non-equity. It all depends on the business model and impact the startup is pursuing.

While in segment environmental impact, Dondi assesses that his business development cannot be relied on commercial financing fully considering its market in Southeast Asia is not yet mature. So it needs encouragement from other funding sources (blended finance), such as foundations, CSR, or social funds.

This is one of the factors why business scalability at startups in environmental impact is difficult to accelerate. Not to mention talking about collisions in pursuit 'impact versus profit' considering both are difficult to achieve at the same time. Dondi considers it difficult to withstand the impact in the long term if the business has been profit-oriented.

"By business model, I haven't seen [environmental startups] that can be fast scalable. However, the trend is going there," said Dondi.