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A sustainability focus can boost startups valuation premium by 15%

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New research by e-commerce giant Amazon has revealed that UK early-stage investors are rewarding startups that demonstrate a strong commitment to sustainability. 

The study, which surveyed venture capital and private equity investors in the UK, shows that companies with a track record of environmental and social responsibility can command a 15% valuation premium. 

Those with poor sustainability credentials on the other hand may see their valuation reduced by up to 4%.

More than half (56%) of investors surveyed said they had declined a startup investment opportunity in the last 12 months due to concerns about a company’s sustainability track record. When asked what startups were lacking, investors cite concerns about the sustainability of their logistics throughout the supply chain and responsible waste management processes.  

The survey also found that more than two-thirds of investors (81%) in the last year had requested additional information about the sustainability credentials of startups they were considering investing in. Personal values and their own organisation’s ESG commitments were cited as the main driving factors.

Amazon sustainability accelerator

This comes as Amazon, climate innovation hub EIT Climate-KIC and climate NGO WRAP, announce the 16 startups to join the second edition of the Amazon Sustainability Accelerator, which starts today.

Eight of these startups are from the UK. Among them is the e-scooter manufacturer bo Mobility. bo’s CEO and Co-Founder Oscar Morgan, a former Formula One Engineer who is developing a premium e-scooter, told Zag Daily that the company’s mission helped it to stand out in the application process.

“At bo we do not subscribe to the post-puritan philosophy that it has to hurt to be good: we believe life should get better as it gets more sustainable. Our work at bo is to take the inherent efficiency of the lightweight electric powertrain and package it into vehicles that are safe, sexy and great fun to ride.”

The bespoke 12-week programme offers workshops, mentorship and a tailored curriculum to help founders establish a sustainable business. They will also receive guidance to assess their business’ climate impact and develop strategies to improve their environmental footprint.

Startups will receive a £10,000 grant and US$25,000 worth of AWS Activate Credits. After the programme, the startups will have the chance to pitch to an audience of seasoned investors.

Last year’s startups raised over £4.5 million and increased sales on and off Amazon’s platform by an average of more than 250% following their participation in the accelerator.

“Today’s research highlights the clear premium given to businesses with strong sustainability credentials and illustrates how environmental impact is increasingly guiding investment decisions, as investors seek out solutions to address today’s climate and waste challenges,” said John Boumphrey, Amazon UK Country Manager. 

“The Amazon Sustainability Accelerator is the ideal launchpad for high-potential startups, and we are proud to be helping a second cohort of founders scale their businesses to deliver innovative technologies and sustainable products.”

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