James Faulkner, Founder of Vala Capital, spoke to GBI magazine to discuss why he’s put sustainability at the centre of their investment strategy.
The volatility in gas and electricity markets affecting all of Europe this winter has driven home the exposure that both individuals and businesses have to the natural gas market. As the world experiences increased energy prices and further transitions into renewable and clean energy, all businesses will be affected. Sustainability is an imperative for every business, and for James this recent convulsion was a wake-up call to businesses large and small. They need to ask themselves how they can minimise consumption, reduce the amount of energy they use, and reuse whatever they can.
For many businesses, reducing energy consumption and implementing circular economics isn’t just the right thing to do, it’s a way of not getting hurt. As James explained “if a business has not dealt with its supply chain and minimised the disruption and impact it makes, then that business is putting itself under threat.”
The other side of this coin is that both business and retail consumers are demanding sustainable solutions to mitigate climate change. It is not just climate change either, social responsibility and governance are increasingly at the forefront of consumer buying habits. For James, if a business is not addressing these issues, then it will have a direct impact and is likely to put at risk whether your customers are going to buy from you.
“It’s not that we’re being sanctimonious about it – what it’s about is sustainability in its truest sense, making this a business imperative.”
Vala has gone an extra step and the Fund’s capital is contingent on the progress of that sustainability journey. The Better Ventures EIS Fund will only invest in businesses that align themselves with the greater interests of society and the environment. Any business Vala invests in is expected to sign up to the platform, FuturePlus, that identifies where that business is in terms of its sustainability and targets its progress along that journey.
Recently, Jasper Smith Founder of Vala has said that he wants companies to better their sustainability goals as a competitive advantage.
Another important aspect of this ethos translates to Vala’s investors too. James highlighted that for a long time the term Impact Investing was a euphemism for a business doing the right thing but one that wasn’t going to make great returns. In explaining their approach James said, “We want our companies to make a great impact, but we expect them to be very successful because of that impact. Not to be very successful despite that impact.”
Another important outcome from measuring sustainability as Vala does is that it helps to avoid greenwashing. Greenwashing is the practice of saying an investment is ‘green’ to attract investors when it really isn’t. As James noted historically this has both undermined the confidence in financial services and resulted in investors’ money not going into where they wanted it to.
For James, it is one thing to say a Fund is committed to ESG and another to translate that commitment into activity, action that is demonstrable and measurable.
How this manifests itself within Vala’s strategy can be likened to a two-bucket system of investment. First is the generalist bucket, the Better Ventures EIS, which invests across a variety of themes and for these Vala requires companies to become more sustainable. If these companies do not meet the targets set out with FuturePlus then Vala can withhold capital.
The second bucket is geared towards outcomes, the Sustainable Growth EIS. These companies will also be from a variety of sectors but will have technology, a product, or service that is in support of a sustainable, greener future.
James noted this approach has grown over some years in an organic way from within Vala. As Vala has grown it has attracted team members who have a particular passion around sustainability. As the team sought to create and develop their process they have seen sustainability driven investments move from very early stage businesses to businesses gaining traction and momentum.
Innovative and disruptive technology companies need early investment, they need capital and as James concludes “this is where EIS does its job.”
This article is included in our 2022 comprehensive annual EIS/SEIS report, which is now available to our Financial Adviser readers here
About James Faulkner
James is one of the Directors and has responsibility for the experience of the investors and their advisers. James has enjoyed a successful career in sales and marketing for over 30 years primarily within financial services with PwC, ABN Amro and Dun & Bradstreet but with spells in manufacturing and consulting too. James is a Chartered Member of the CISI and holds the Level 4 Investment Advice Diploma.