Investment firm BlackRock, a previous backer of American Express Global Business Travel and Uber, announced on January 14 that sustainability should be its “new standard for investing.”
“Our investment conviction is that sustainability-integrated portfolios can provide better risk-adjusted returns to investors,” BlackRock CEO Larry Fink wrote in a letter to clients. “We believe that sustainable investment will be a critical foundation for client portfolios going forward.”
Although sustainability is gaining momentum among investors, is it advancing in travel?
Sustainable investing in 2020
Plug and Play Tech Center, recognized by Phocuswright as the most active investor in the State of Travel Startups 2019 report, is planning a big push towards sustainability startups in 2020.
“Sustainability is super big for us,” says Jordan Bray, head of corporate partnerships for travel and hospitality at Plug and Play. “In 2019, we launched an entire team that's dedicated to sustainability - that can be anything from new materials, travel and the mobility space.”
Bray adds: “As it relates to sustainability, it's a huge focus for us this year.”
Among travel companies, Bray notes that there are some companies that are focused on sustainability and others that are merely just talking about sustainability.
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“I think that a lot of companies in our industry are just taking advantage of a buzzword and using it for PR right now,” he says.
In October, Plug and Play announced a new partnership with the Alliance to End Plastic Waste to identify and invest in startups that address plastic waste in the environment.
“Over the next five years, $1.5 billion will be deployed and invested into technologies that can help manage plastic waste and promote efforts to make our world a more sustainable place to live in,” says Bray.
ESG factors
Investors interested in sustainability often consider it through the totality of environmental, social and governance (ESG) factors.
Although this concept has been around for a few years, it has gained traction recently - with a record $20.6 billion going into funds focused on ESG in 2019.
Fritz Demopoulos, founder of Queen’s Road Capital, says that sustainability (including all ESG factors) is considered when he invests in a travel company.
Several of the companies that Demopoulos has invested in, including GetYourGuide, incorporate ESG elements.
“By definition, an excellent pitch would address sustainability,” says Demopoulos. “A mediocre pitch wouldn't.”
Demopoulos notes that ESG factors “evolve with the development of a company” because it often takes time for stakeholders to “develop plans and eventually implement programs to address ESG factors” as part of an ongoing process.
What does this mean for investors?
“We recognize the dynamic and evolutionary nature of ESG,” says Demopoulos, “and as such are on the lookout for founders, teams and co-investors which are flexible, aware and mindful of sustainability and who are willing over a period of time to formulate and implement plans.”
Early stage support
Firms that invest in early stage startups, such as JetBlue Technology Ventures, are increasingly putting an emphasis on environmental sustainability.
“Travelers today are more conscious of their carbon footprint than ever before,” says Bonny Simi, president of JetBlue Technology Ventures. “As one example, the reduction of pollution that comes with the electrification of aircraft is extremely appealing for the industry and for investors.”
JetBlue Technology Ventures participated in the $590 million Series C round for Joby Aviation, a fully electric aircraft with zero emissions.
Simi adds: “While the environmental impact of our startups is always a consideration when we invest, with JetBlue Airways’ commitment this year to go carbon-neutral on all domestic flights, we’ll more actively seek out sustainability-focused startups and technologies for aviation.”