In venture capital, the focus is often on financial returns, but at Butterfly Ventures, we are committed to measuring a different kind of impact as well. Our approach to investment is not just about fostering high-growth companies—we aim to create lasting, positive change. Through our sustainability strategy, which spans the entire investment process from the earliest stages, we want to ensure that our portfolio has a net positive impact on the society and environment.
Ranked No. 1 in Sustainability in a Finnish LP Survey in 2024
As an Article 8 fund, we are committed to staying ahead of regulatory changes and consistently evaluating how we can improve our sustainability practices. The landscape of sustainability is always shifting—whether it is new regulations or emerging best practices—thus, we actively monitor these changes to ensure that we are not only compliant but also at the forefront of responsible and sustainable investment practices.
We have always been dedicated to being transparent about our practices and the impact of our investments, ensuring that our stakeholders have a clear understanding of our sustainability efforts. We were pleased to receive recognition for this when, in 2024, we were recognised as the leader in sustainability in a Finnish LP survey (SFR Alternative Managers).
+35% Net Impact: Investing in a Better Future
Across all our funds, our net impact score is currently +35%. Individual scores from our three funds, from oldest to newest, are +41%, +41% and +23%. The figures speak to the substantial positive environmental and social impacts our portfolio companies create—representing real, measurable effects of our investments, including for example improving access to essential services and promoting more sustainable practices in various industries.
The net impact ratio of our investments tends to be relatively low in the first few years because we invest in early-stage deep tech companies. At this stage, the actual, realised impact of their innovations is still minimal, as the technology is often still in development. At the same time, these companies typically rely on highly educated and specialized talent, meaning they use a lot of ‘scarce human capital.’ This distorts and decreases the net impact ratio significantly. However, this situation is always expected to be temporary and does not reflect the long-term impact that the company is expected to have. Therefore, our net impact ratio is expected to improve even more by time when the companies mature.
Breaking Down the Net Impact Ratio
The net impact ratio of our portfolio is assessed by Upright Project, with whom we have been collaborating for five years. The partnership allows us to quantify the broader social, environmental, and societal contributions of our investments. Upright Project has developed a comprehensive model that calculates the net impact of companies by analyzing both positive and negative effects across four key dimensions:
- Environment: Assessing impacts on natural resources and ecosystems
- Health: Evaluating effects on public health and well-being
- Society: Considering social contributions and community well-being
- Knowledge: Measuring advancements and dissemination of knowledge
These dimensions are further divided into 19 specific impact categories, providing a nuanced understanding of a company’s overall impact. Upright Project uses a wide range of data sources to assess a company’s impact, including scientific research, public databases, and industry insights.
The Key Components of Our Positive Impact
Besides contributing to job creation and tax revenue, our portfolio has the most positive impact in the following categories: Social infrastructure, Creating and distributing knowledge, Meaning and joy, Knowledge infrastructure, Preventing and treating physical diseases, and Nutrition.
An example of a company with a significant positive impact on the Social infrastructure category is Retein: they have developed a patented molecular separation technology inspired by natural cell membranes, enabling precise and sustainable recovery of valuable resources from water, including clean water itself. The solution addresses critical challenges in resource scarcity and environmental sustainability.
Another one of our recent investments, Happy Plant Protein, has a significant positive impact on the category Nutrition. Happy Plant Protein is revolutionising the plant-based protein industry through its cost-effective and sustainable production method that reduces energy consumption and minimizes water usage and waste generation.
Zenniz is a great example of a company contributing positively towards Preventing physical diseases as well as Meaning and joy. With their smart tennis technology, Zenniz enriches the playing experience, making it more engaging and accessible for players of all levels.
Exploring Impact Metrics Beyond the Net Impact Score
In addition to the net impact scores, we take a comprehensive approach to sustainability by tracking a range of other metrics. We monitor our investments’ alignment with the UN Sustainable Development Goals (SDGs) and we assess the EU SFDR PAIs (Principal Adverse Impacts), focusing on how our investments affect sustainability factors such as biodiversity, carbon emissions, and water usage. Furthermore, we monitor the EU Taxonomy alignment.
Detailed reports on all the metrics of new investments within the Butterfly Venture Fund IV are published quarterly on our website.
On a portfolio level, we are most aligned with the following SDGs: Decent work and economic growth, Industry innovation, and infrastructure, Good health and wellbeing, Sustainable cities and communities, and Affordable and clean energy.
Carbon-Free Every Year: How We Eliminate Our Emissions Annually
In line with our broader sustainability efforts, we are committed to eliminating all our carbon emissions on an annual basis. Through our collaboration with CO2Esto, we have the opportunity to purchase emission allowances from the EU Emissions Trading Scheme.
As part of our sustainability strategy, we acquire at least the same amount, or more, of allowances as we emit each year. However, our primary focus remains on keeping our carbon footprint as low as possible by prioritising low-impact travel options and opting for online meetings instead of traveling, whenever feasible.
Driving Long-term Sustainability
At Butterfly Ventures, we see sustainability as an ongoing process. We believe that real impact is created over time, with our investments and decisions contributing to a broader, long-term vision. Sustainability is not just a set of actions we take, but a core principle that influences our investment approach from selecting the companies we invest in to how we monitor and measure the results of those investments.
You can read more about our approach to responsible investing and ESG here and details about our methodology regarding the net impact assessments here.