A materiality assessment is a review that helps an organisation identify and understand the relative importance of specific sustainability topics. In short, it’s a review done to ensure that we will later spend time on the issues that are most important to us and to the world around us - doing the right things rather than just doing things right.

This review is also crucial to ensure that we will later be able to communicate with our stakeholders in a valuable way.

In our strategic review, we followed the structure of a double materiality analysis - hence looking at what is:

1) Northzone’s potential impact on society and environment and;

2) How sustainability can disrupt the Northzone business model

Our 4-step methodology

Much of the previous work on materiality in the finance sector is focused on later-stage asset classes. Very little exists that looks specifically at venture capital’s role and material areas. We recognised that many funds have difficulty incorporating sustainability in a meaningful way, rather than simply treating it as a checklist exercise. As a result, we have structured our strategic overview in the following way:

First, we conducted a desk review of how the venture eco-system is affected by sustainability-related areas, and what seems to be working and not (Step 1). Then, we performed a qualitative assessment of our most material areas based on over 100 conversations with stakeholders across the eco-system (Step 2). We then ranked the areas according to importance to create a strategic materiality matrix (Step 3), and finally chose to share our results and the process with the wider eco-system in order to ignite change and promote faster progress (Step 4).

Step 1: Industry review and identification of stakeholders

• We started by reviewing current industry practices, drivers and relevant stakeholders. In this review, we included analyses of the venture landscape and link to ESG and impact. The World Economic Forum and the UN PRI were especially useful for research, developing standards and case studies. Our collaborations with Venture ESG and ImpactVC were key to understanding best industry practices.
• We conducted this review to map what seems to be effective and what is hindering generalist venture capitalists in terms of adopting more sustainability measures. This initial review was used to create a list of important stakeholders that should be included in a deeper qualitative review.

Step 2: Stakeholder conversations

• Relevant Stakeholders

  The relevant stakeholders for Northzone’s materiality analysis range from LPs to our founders and experts in the ecosystem.

  1. Limited Partners (LPs)

  2. Internal Investors and Portfolio Team

  3. Northzone Portfolio Founders and Operators

  4. Generalist Peers

  5. Impact VCs

  6. Sustainability and Climate theme experts

• We decided on a qualitative approach rather than sending a quantitative survey. Conversations focused on how Northzone can have the greatest possible positive impact on the environment and society and the sustainability-related risks that might disrupt our model. The conversations took place during the fall of 2022 and were led by our Head of Impact & Sustainability, Anna Skarborg.

Step 3: Design outputs: Value creation, Materiality map, Theory of Change

• Based on our desk review and the stakeholder conversations, we put together a perspective on our own potential impact and the Northzone Value Add graph that summarises the value add that sustainability can have for Northzone as an investment fund.
• The Northzone value-add perspective was then combined with a ranking of the different topics and summarised in our Materiality matrix.