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Why startups must factor in ESG for investment success 

Environmental, social and governance efforts will always pay off in the long run

One Moto One Moto
The UAE's One Moto secured $40 million in lease financing for its goal to introduce 50,000 electric delivery vehicles by 2025

In years gone by, it was idealistic millennials who spurred growth in sustainable investments.

But today, every single generation is considering environmental, social and governance (ESG) options or how their funds can help to build a positive impact economy.

ESG is often talked about as strategically vital for larger corporations, but little is said of how startup success and growth can be directly linked to a solid ESG strategy.

At its most basic, such a strategy involves conducting business in a way that provides long-term value without producing any negative effects on the environment or society. 

An optimal ESG framework takes various factors into account including reducing carbon footprint, encouraging diversity, going green and introducing wellness programmes for employees.

It also focuses on initiatives that matter the most to a business and are the easiest to mobilise.

A solid ESG strategy also earns customer loyalty, reduces operating costs and improves both asset management and financial performance.

When it comes to measuring impact the UN Sustainable Development Goals are still the most-used industry framework.

Showing up to be counted

Investors and lenders are highly attracted to organisations that invest in ESG – in fact a 2022 Dow Jones survey of 200 investment professionals projected that ESG investments would more than double over the next three years.

By providing a comprehensive view of their ESG practices and goals, entrepreneurs can influence decisions and encourage investors to pick their company for funding.

For example, UAE-based One Moto secured $40 million in lease financing thanks in part to its goal of fully decarbonising the last-mile industry by introducing 50,000 electric delivery vehicles by 2025.

The firm is unveiling some incredible advancements for the UAE, including the first EV manufacturing plant in Dubai. 

And by promoting the adoption of electric vehicles, One Moto is contributing to the UAE’s vision for a more sustainable and environmentally conscious future.

If you are a smaller player do not assume that a lack of resources will be a hindrance to adopting ESG, or that your ESG efforts won’t pay off in the long run. They will always have a positive effect on a business.

Smaller businesses are frequently in closer proximity to their customers and have more opportunities to share their sustainability stories and connect at a deeper level.

Founders who make efforts to promote diversity, give back to the community, improve labour relations and take a stand on socioeconomic issues will play a major role in strengthening a company’s brand.

And startups can attract socially conscious investors with less bureaucracy than larger organisations.

ESG not only makes a company favourable to investors, but it can also lead to an uptick in its financials.

Even small efforts towards sustainability, such as recycling, going paperless and making energy-efficient upgrades can improve a company’s bottom line and ROI. And naturally, this makes it even more attractive as an investment.

Lucy Chow is secretary general of the Dubai-based World Business Angels Investment Forum and general partner of the WBAF Angel Investment Fund