5 lessons learnt from implementing an ‘E’ clause with portfolio companies

Here are the key takeaways and a concise, founder-friendly summary you could use or adapt as a blog, LP update, or portfolio resource.

Why an Impact & ESG Clause Isn’t Always a “No Brainer”

As an impact tech VC, AENU’s instinct was simple: if we back intentional founders building impact‑interlocked businesses, then agreeing to a robust environmental ("E") clause should be obvious. Our initial clause focused on four core commitments:

1. Commit to net zero by 2030
2. Design an emissions reduction strategy
3. Measure Scope 1, 2, and 3 emissions
4. Compensate residual emissions with high‑quality carbon removal and/or avoidance offsets

We saw these as a minimum standard for climate‑aligned businesses. In practice, we learned that even impact‑driven founders can hesitate—not because they don’t care, but because of capacity, timing, and perceived trade‑offs. Through multiple negotiations and feedback loops, we identified five recurring bottlenecks and how to address them.

1. Lack of Internal Accountability

Problem: Early‑stage startups often feel they lack the people, time, and skills to deliver on formal ESG commitments.

What works:

• Hard‑wire the ‘E’ clause into legal docs. Include it in the shareholders’ agreement (not just the term sheet) and, where possible, align with other investors so founders see a united cap table.
• Assign clear ownership. Even without a dedicated sustainability FTE, allocate a fraction of an existing role or set up a small internal sustainability committee with explicit responsibilities.
• Board‑level oversight. Ensure environmental goals are agreed and reviewed by the board at least annually so they are treated as strategic, not “nice‑to‑have” side projects.

2. Avoid a One‑Size‑Fits‑All Clause

Problem: Our first clause was long, exhaustive, and uniform across very different companies (social vs climate, hardware vs software, early vs growth). For early‑stage founders fighting for product‑market fit, a heavy ESG clause felt misaligned with their reality.

What works:

• Segment by stage. We split our original clause into two versions aligned with our ESG maturity assessment: one for early‑stage, one for growth‑stage.
• Focus on materiality. Expectations differ for hardware vs software, and for social vs climate solutions. We ask: What is realistically material and feasible for this business at this stage?
• Aim for ‘E clause–founder fit’. The goal is not to dilute ambition, but to calibrate it so it is credible, implementable, and doesn’t undermine core business execution.

3. Tailor Measurement Expectations to Stage

Problem: Founders—especially early‑stage—are overwhelmed by the range of carbon accounting options and unsure where to start.

Your experience at AENU captures a core tension in impact VC: setting ambitious, climate-aligned expectations while staying realistic about what early-stage teams can execute.

Key reflections and takeaways from your journey:

1. Accountability must be formal and resourced

• Moving the 'E' clause from term sheet to binding legal docs creates real accountability and aligns the full cap table.
• Even without a sustainability FTE, assigning clear ownership (fractional role or committee) and board-level review cycles turns climate from a "nice-to-have" into a managed priority.

1. No universal clause – stage and business model matter

• A single, exhaustive clause was too rigid for the diversity of your portfolio (social vs climate, hardware vs software, early vs growth).
• Splitting into stage-appropriate clauses and tying expectations to ESG maturity and business model (e.g., hardware vs software materiality) created better "E clause–founder fit" and reduced friction.

1. Right-size measurement expectations

• Early-stage: start with lightweight tools (e.g., LFCA’s free calculator) to build awareness and identify major emission drivers.
• Growth-stage: graduate to full carbon accounting (e.g., Minimum, Normative, or consultants), with some funds de-risking adoption by sponsoring licenses.
• Hardware: prioritize LCAs to validate climate-positivity of the core technology.

1. Implementation support is as important as the clause

• A clause without a roadmap often stalls. Providing templates, examples, peer connections, and a clear point of contact within the fund materially increases the odds of delivery.
• Your internal impact team effectively acts as an in-house sustainability advisor, which is a strong differentiator and de-risks the perceived burden for founders.

1. Structured follow-up turns reporting into action

• SFDR creates a regulatory backbone for data collection in Europe, but your use of tools like Apiday shows how reporting can become a management tool, not just a compliance exercise.
• Using data to identify gaps, tailor support, and prepare companies for future regulation aligns impact with long-term enterprise value.

Overall, your evolution—from a long, one-size-fits-all clause to stage- and model-tailored expectations backed by hands-on support and structured follow-up—illustrates a practical blueprint for other VCs:

• Make climate commitments binding, owned, and reviewed.
• Tailor ambition to maturity, without diluting long-term goals.
• Provide tools, templates, and human support, not just requirements.
• Use data and regulation as levers for continuous improvement, not box-ticking.

Continuing to iterate the clause and share learnings publicly, as you’re doing, is exactly how norms in the ecosystem shift toward climate alignment as a default expectation rather than an exception.