Mercury Fund takes on SDGs as part of its investment thesis

The following was originally posted on Venture Capital Journal by Emilia David


 

More companies are aligning their mission with the UN’s sustainable development goals, says co-founder Blair Garrou.

When Blair Garrou, Co-founder of Mercury Fund, encouraged his daughters to participate in the Model United Nations, he never thought it would inspire a different approach to investing.

Garrou had watched his two daughters, one in middle school and the other in high school, participate in Model UN for years, and even brought them to the UN building in New York to discuss solving global problems with other school-aged kids.

But those trips to the UN gave Garrou an idea. By aligning Mercury’s investment to the UN’s sustainable development goals (SDGs), he felt that his venture fund could better provide returns and impact.

With that in mind, Houston-based Mercury plans to introduce the SDGs to its investment thesis. Part of the process it is categorizing its current portfolio based on the SDGs.

Garrou said the plan would be presented to the firm’s LPs in October, though it’s something he and other team members have already been incorporating unconsciously for a while. “We weren’t [consciously] doing it, but certain investments would always fit an SDG based on our theme,” he said. “In our previous fund, 70% of our portfolio addresses an SDG.”

Garrou noted that more mission driven startups are being launched. The SDGs too, he said, matches up well to the many problems innovators are trying to solve.

The sustainable development goals are 17 guideposts published by the United Nations meant to act as a framework for a sustainable future. They succeed the Millennium Development Goals. Member nations of the UN approved in 2015 and aim to achieve the goal by 2030.

The 17 SDGs are: eradicating poverty; zero hunger; promoting good health and well-being; quality education; gender equality; clean water and sanitation; affordable and clean energy; decent work and economic growth; industry, innovation and infrastructure; reduced inequalities; Sustainable cities and community; Responsible consumption and production; climate action; protecting life below water and life on land; peace, justice and strong institutions; and partnerships for the goals.

Garrou is confident LPs will see the value of aligning Mercury’s current and future portfolio with the SDGs.

Mercury raised more than $82 million for its fourth fund in 2018, according to the database affiliate publication Private Equity International (subscription required).

“I think our LP’s will be surprised because they chose to invest in us for certain reasons,” Garrou said. “But once they see that, our practice really hasn’t changed. But yet, there are all these added benefits. So I think they are going to be excited and feel good.”

Garrou said more LPs now understand the importance of investing in companies striving to meet one of the lofty goals set by the SDGs. In addition, LPs are undergoing a generational shift and investors a greater connection between, sustainability and returns.

Garrou said the introduction of SDGs does not mean Mercury is transforming itself into an impact fund, as none of its investments will have an impact angle. Instead, it’s a move that he believes other general funds will follow as more potential targets launch with more mission driven entrepreneurs. And many solutions that startups come up with tend to fit within one or several of the SDGs in the first place.

Garrou’s children, one of whom is now interested in colleges with sustainability programs, had inspired Mercury to practice conscious capitalism, the idea that businesses should also be socially responsible.

“It is making us think twice about the new themes we are investing in and can we align those new themes and find the best investments that are SDG driven,” he said. “We are finding a lot of those deals that align with SDGs as people move everywhere, and it makes for a really interesting investing environment.”

 

Read the article in Venture Capital Journal here.

Posted August 2021 by | Venture Investment Strategy