Investors reward start-ups that have a strong sustainability vision

Early-stage investors are rewarding start-ups that have a strong sustainability vision, new research from tech giant Amazon shows. According to European venture and private equity investors, such companies can benefit from a 15% value premium. This presents opportunities for entrepreneurs who are developing more sustainable products and businesses. In contrast, start-ups with a limited focus on sustainability may see their valuation drop by as much as 8%.

Over the past 12 months, more than two-thirds of investors (71%) asked for more details about the sustainability performance of start-ups they invest in. Personal values and their own company’s environmental, sustainability and governance (ESG) commitments played a role in this.

In the same period, more than half (52%) of investors turned down an opportunity to invest in a start-up because of concerns about the company’s sustainability. When asked what start-ups lack, investors cite concerns about the sustainability of their logistics in the end-to-end supply chain and of their waste management processes.

Moreover, seven out of ten investors indicate that the scope of current and upcoming ESG regulations makes it less attractive to invest in start-ups. The vast majority (84%) believe that start-ups need better support to become environmentally sound businesses. 81% of investors say more than half of the start-ups they have on their radar lack the right technology and know-how to operate more sustainably.

Launch platform for high-potential start-ups

The survey comes in the wake of the announcement by Amazon, Europe’s climate innovation hub EIT Climate-KIC and Wrap (a leading UK NGO for climate action) of the 16 start-ups selected to join the second edition of the Amazon Sustainability Accelerator. The programme attracted applications from more than 1,500 start-ups.

“Research highlights the undeniable premium placed on companies with strong sustainability credentials. It illustrates how environmental impact is increasingly guiding investment decisions. Investors are looking for solutions to address today’s climate and waste challenges,” said Roeland Donker, Country Manager Netherlands at Amazon. “The Amazon Sustainability Accelerator is the ideal launch platform for high-potential start-ups. We are proud to help a second cohort of founders scale up their companies to deliver innovative technologies and sustainable products.”

Dutch start-up Terrawaste

Besides featuring start-ups creating more sustainable consumer products, for the first time this year the programme includes start-ups developing technology to help the industry recycle products more effectively and efficiently. They were selected by a panel of venture capital and sustainability experts. One of the chosen start-ups is Dutch company Terrawaste, which offers a waste recycling technology that converts non-recyclable dry, wet and mixed-plastic waste into valuable, carbon-negative materials.

Aija Pope, CEO of the Rotterdam-based start-up, comments: “We are developing innovative waste recycling technology to convert waste plastic and mixed waste into sustainable, valuable and circular products. We are proud to be in the Amazon Sustainability Accelerator programme, alongside other groundbreaking start-ups. Without the support and recognition of partners like Amazon, we would not be able to give our company the momentum it needs and continue to develop at a rapid pace.”

Amazon Sustainability Accelerator programme

The Amazon Sustainability Accelerator programme lasts 12 weeks and helps start-ups to navigate the challenges of starting and scaling up a sustainable business. The programme features expert-led virtual and in-person workshops, specialized mentorship, a tailored curriculum and access to a network of like-minded founders. Amazon and EIT Climate-KIC will work in collaboration to guide participants through a Climate Impact Forecast as the basis for assessing their company’s climate impact and developing strategies to improve their environmental footprint.

The participants also receive a financial boost with a €12,000 equity-free grant and $25,000 worth of AWS Activate Credits. They will gain access to cloud computing services, and be able to meet and work with Amazon leaders and key scientists. All start-ups will also have the opportunity to pitch their company to investors who can help them build connections and raise further funding. Last year’s Accelerator start-ups raised more than €5 million and increased their sales on and off Amazon by an average of more than 250%.