Mouro Capital: Providing post-investment ESG support to portfolio companies

Mouro Capital provides financial technology entrepreneurs with capital and post-investment support to help them succeed. This year, we are formalising our ESG approach with portfolio companies to help them address their future growth needs.

Why we provide ESG support

We believe that investee companies that have a proactive ESG strategy can drive long-term value creation and risk mitigation and can improve their market positioning to key stakeholders; namely:

• consumer and enterprise customers who want to go green and favour sustainable offerings;
• employees who aspire to join forward-thinking teams and platforms with positive ecological and social impact;
• investors who increasingly incorporate ESG factors in their investment philosophy.

Given their growth stage, some of our companies may be focused on other urgent strategic priorities such as fundraising, hiring or market roll-out. We therefore prioritise supporting those companies that have already addressed these things and that may have a key risk/opportunity related to their core proposition, such as environmental management for our commerce-related ventures (see the examples below).

We also engage all our portfolio companies on diversity, equity and inclusion (DEI), something we are passionate about and that is straightforward to quantitively track on an ongoing basis. As an investment manager we have benefitted from having a gender-diverse team and promoting diversity within the venture capital industry (see our work at included.vc). We want to ensure that we back companies that attract, include and develop the best talent, with no restrictions.

How we provide ESG support

Our ESG values form part of our underwriting as well as of our post-investment approach. Pre-investment, we assess the founders’ strategic ESG approach as part of our due diligence. We deliberately engage our portfolio on ESG issues post-investment, after we have built trust and collaboration on the broader strategic agenda. As we are initiating these ESG talks, we carefully prioritise our engagements in terms of audience and topics.

When developing our process, we made four decisions on how we will approach our interactions with portfolio companies:

1. We mainly target our ESG dialogue towards CEOs: We separate such discussions from any quarterly financial information requests that we make to the CFOs. This helps us to strategise and carry out any agreed collaboration between our team and the management teams.
2. We do not force timing: We ask portfolio companies to schedule such sessions when it makes sense for them. This pull approach has attracted the teams that are more advanced in their ESG thinking, allowing us to build strong examples for others to follow in the coming months.
3. We frame the dialogue as an offer of support rather than an audit: We want to ensure our portfolio companies make plans even if they have not yet institutionalised their ESG practices. We are here mainly to listen to their priorities – based on their own materiality assessment – before we propose ideas.
4. We equip ourselves with knowledge and tools: We are gathering best practices and tools for the ESG issues we have identified, starting with environmental issues and diversity, to implement appropriate policies across our investments. We are also building a network of external ESG specialists that can advise and support our portfolio companies on an ad-hoc basis.

Examples

Below are two examples of how we have supported portfolio companies focusing on environmental sustainability.

Helping CrossLend uphold one of its core values: sustainability

CrossLend is a fintech company providing end-to-end solutions for loan asset transactions.

In 2018, CrossLend sought to define its core values. As an active board director, our general partner helped the management team identify sustainability as crucial for inclusion among the seven key pillars of Crosslend’s growth strategy and platform design.

Since then, CrossLend’s platform has developed to include new investment assets that are ESG-linked, such as the recent issuance of an investment-grade ESG note – backed by assets of a German bike leasing company. 

Among other things, CrossLend collaborated with Scope Ratings to independently verify the note’s impact, in accordance with ICMA Green Bond Principles. It estimates that the transaction saves more than 11,500 tonnes of CO2 per year, equivalent to the annual electricity consumption of 1,600 individuals.^[1]

Seeing substantial demand in the market for similar transactions, CrossLend has started approaching other Asset-as-a-Service companies focused on ESG issues, for example, Energy-as-a-Service models that promote a range of low-carbon technologies. It aims to support these companies in their growth by providing an efficient connection to capital markets funding that would otherwise not be available to them.

We are supporting CrossLend in its efforts to attract green assets to its marketplace platform and enhance its ESG disclosures to platform investors. To this end, we initiated and continue to support the partnership that CrossLend has with Santander Group, one of our limited partners, focused on mobilising green project finance assets.

We encouraged the two parties to design and launch pilot transactions and as a result, CrossLend is introducing a green rating for such assets, validated by a third-party rating agency, enabling investors to easily evaluate their credit and green performance.

Helping Byrd further enhance its green logistics set-up.

Byrd provides a digital fulfilment platform for e-commerce retailers, with flexible warehousing and shipping services.

When backing the team earlier this year we noted that byrd’s approach to sustainability was already advanced compared to its peers – for example, it partners with its main carriers (DHL, GLS) on carbon-neutral shipping and it has been offsetting its carbon footprint since 2020.

In our post-investment discussions, we encouraged the management team to further promote their environmental management principles with their warehouse partners, as they expand their network across Europe, notably around energy/waste management and packaging optimisation.

We believe that e-commerce retailers will increasingly expect innovation from their service providers to better monitor and manage their carbon footprint – including third-party logistics partners such as byrd – as part of the environmental management certification of their entire value chain.

In the coming months, we intend to further support byrd to:

• educate its merchant clients regarding consumers’ e-shopping trends in favour of sustainably manufactured and shipped products; and
• promote its solutions to help these merchants deliver green shipping solutions to their consumer clients.

As part of this, we intend to introduce environmental management and assurance providers to byrd to help accelerate its strategy to certify itself and its warehouse partners and carriers.