Artesian has released our Impact Report for 2022/23 to provide context and reflection on the outcomes of our investment strategies beyond financials. The report endeavours to broaden the field of view on our work as capital allocators, and strives to build objective and data driven insights on the impact Artesian (and our investors) have on all our stakeholders.
We’ve always been driven to take a unique approach to asset allocation, and the same goes for our impact approach. We’re committed to transparency and accuracy, and we’re well aware of the rise of greenwashing as more and more investment managers make claims about their sustainability credentials. To open the report this year we explore the process we use to assess the rigor and authenticity of the green claims made by the bond issuers and portfolio companies in which we invest.
Plus, our reporting goes further, with the launch of an industry-first ‘Impact Calculator’. Developed by the fixed income team, it allows investors unparalleled insights into the impact of our bond portfolios with a curated set of data points covering key metrics.
This year, our core impact metrics have all shown improvement, as well our internal measures of diversity. And we continue to expand our footprint through robust partnerships with Artesian signing an ‘Asia-Pacific innovation alliance’ with Japanese banking giant MUFG. Also, Artesian was a founding partner of the Cremorne Digital Hub, a Victorian Government project intended to foster the state’s growing tech ecosystem.
On the whole, we now manage $1 billion, made up of $460 million in debt, and $540 million in venture capital (VC). Across both pillars we have 40 employees in 8 cities; our fixed income specialisation is made up of 10 experts across all the major trading global centers, plus, we are the most active early-stage VC in Asia-Pacific with more than 625 startup investments across the region.
Artesian's Impact by the Numbers
Fixed Income
Our investments in green, social & sustainable bond issues accounted for 65% of our total fixed income public security investments..
The investments, within the Artesian Green & Sustainable Bond Fund, the Artesian Corporate Bond Fund, and the Artesian High Impact Green Bond Fund, have led to the abatement of 21,943.1 metric tonnes of CO2e (equivalent to taking 10,287 cars off the road).
The baseline of our approach is to apply an ESG risk assessment to all bonds in our portfolios, but we also target positive outcomes for the use-of-proceeds from a number of ‘high-impact’ bonds to drive both climate resilience of existing corporate infrastructure, as well as supporting innovation through investments in venture debt.
From a social perspective, the fixed income team applies a gender lens by assessing the number of women that sit on boards of issuing companies. This year we welcomed results that showed 94% of boards of issuing companies have female representation, and 38% have reported on gender pay gap, an improvement from 30% last year.
Venture Capital
In our view, early-stage startups have huge potential for positive impact, and we aim to both tilt portfolios towards those delivering positive outcomes, as well as seeking to support founders to measure and manage key social and environmental factors. Across the year our investments in SDG-linked startups, scaleups and solutions accounted for 73% of total VC investments.
We assess our entire portfolio of early stage companies to analyse the UN global goals to which they’re contributing. This year the greatest concentration of positive impact flowed to SDG 3, Good Health and Wellbeing, and SDG 2, Zero Hunger.
As a cohort, our clean energy portfolio companies drove the abatement of 3,545.2t CO2e. And, across our portfolio of 625 startups, ~30% (182) are women-led.
We also continue to grow the Female Leaders VC Fund with the first public release of results from the fund’s proprietary scoring system. The Gender Diversity Criteria Assessment Score applies weights according to factors such as equity ownership of founders who identify as women, the number of women on the executive/management team, the number of women at board levels, and the presence of transparent gender policies. You can read about the results in the full report.
Another first this year was the publishing of results from our Startup Survey. We recognise that not all early stage companies are in a position to report on key impact metrics, with many yet to establish themselves in the market, or scale-up business models. Nonetheless, it’s a clear signal to our portfolio companies of the metrics and data-points that we’re keen for them to focus on. This year the voluntary questionnaire received a 34% response rate.
Developments in Impact Measurement & Management
These results are made available as part of our annual impact reporting, but the fixed income team wanted to make the results more accessible, to offer investors in the green, sustainable and social bonds more timely access to the impact results of their portfolios, and with more detail.
The result is the Artesian ‘Impact Calculator’, which offers details that go beyond what’s offered by even the most established data providers. To offer impact data at such a granular bond level, the team had to source it internally, they took a hands-on approach, doing desktop research, trawling through impact reports, and seeking out extra insights wherever they could.
“We have screened out deals in the primary market purely because they were not willing to provide granular enough data. As you would expect though, as investors such as ourselves are starting to demand more from bond issuers with respect to impact reporting, the standards are getting better all the time.” explained Australian fixed income lead David Gallagher.
This year’s report includes an interview with some of the team that led development of the calculator.
“As the labeled bond market evolves to fill the needs of issuers and investors we’ll see new structures emerge, and our analysis and reporting will have to adapt to that changing landscape. We feel it is important to own this part of our research and our investing process; and most importantly, this is something our clients should benefit from.” says Kurt Tan, Managing Director, based in New York.
Impact Stories: Big Opportunities Through Investing in Innovation and Supporting Industry Research Organisations
Carbon Liabilities Will Drive Bond Issuers to Invest in Innovation
Artesian operates distinct strategies across fixed income and VC, but their impacts are beginning to coalesce. This is being seen through some bond issuers allocating a portion of their use-of-proceeds to invest in startups as a way to access innovation.
Insights on this trend trend are featured in analysis by Managing Partner, John McCartney, in this year’s report, "It’s driven by governments ramping-up regulations to motivate decarbonisation, this is the ‘stick’, but a ‘carrot’ is also being used in the form of government funding incentives to support clean-tech startups. Large companies will continue to cut their carbon liabilities by updating their business model and processes, which is leading to a boom in the issuance of green bonds. But by directing funds towards early-stage companies they are showing the potential to outsource innovation and future-proof strategic asset"s.
New Approaches for Government, Industry and Research Institute-Aligned Innovation Investment & Engagement
Artesian's capacity to access both the financial and strategic returns of the innovation ecosystem is compounded by its ability to develop powerful collaborative partnerships with government organizations, industry groups, and .research institutes. In the report, Robert Williams, Director and AgriFood Portfolio Manager, shared exciting developments in Artesian’s VC partnership model.
Artesian has built collaborative connections between some of Australia’s world-leading industry research bodies, corporations and high-growth startups that are poised to disrupt these same industries.
Artesian’s climate-VC investment strategy spans agrifood and energy transition verticals, and works with various industry organisations including the the Grains Research and Development Corporation (GRDC) and the Clean Energy Finance Corporation (CEFC). Startups are recognising the value of industry-led finance as a means of integrating domain-focused management insights and engagement that are specific to a particular sector.
It’s an exciting space, find all the details in the Artesian Impact Report for 2023/23 financial year.