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Following the Money: Is Foreign Capital Driving ESG Adoption in Nigeria’s Venture Ecosystem?
- Foreign capital has played a significant role in shaping ESG adoption in Nigeria's vibrant startup ecosystem, with international initiatives such as the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement on climate change having influenced African nations to align their development ambitions with sustainable practices.
- The Nigerian government has initiated several ESG initiatives aimed at promoting sustainable business practices and enhancing compliance among companies.
- Ventures Platform, an early-stage, Africa-focused fund, has impressively integrated core ESG standards into its investment strategy and operations.
- Ventures Platform's three-stage approach includes negative screening, ESG assessment and post-investment support. During the due diligence phase, potential investments undergo a structured impact assessment anchored on the five dimensions of impact.
- EDFI comprises 16 publicly-backed institutions that provide financing and advisory services to private sector enterprises in emerging and frontier markets.
- Two main areas where DFIs have influence on VC funds are through their impact investment activities and their role in setting ESG standards.
- Despite the international investors' expectation of ESG compliance, found Odunayo Eweniyi, Co-founder and General Partner of FirstCheck Africa, ESG criteria are not actively incorporated into their investment decisions.
- A potential solution lies in fostering more African investors and institutions that can influence, shape, and adapt ESG frameworks to better suit the continent's unique challenges and opportunities.
- The future of ESG in Africa is promising, and ESG considerations will one day become a key differentiator for African startups, driving innovation in areas like clean energy, financial inclusion, and sustainable agriculture and will continue to shape the way investors and entrepreneurs collaborate, with an emphasis on long-term, systemic change.
- Startups addressing ESG concerns can benefit from mitigation of various risks, establish a stronger governance structure, which is crucial for growth and stability and can help secure funding from investors.
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