Environmentalizing Venture Capital: The Politics of Using “Life Cycle Assessments” for the Valuation of Startup “Impact”

Since the early 2000s, a growing number of venture capital firms (VCs) have emerged that promise not only financial returns but also a positive environmental “impact”. Initially, “impact”-oriented VCs focused on classic social issues such as homelessness, education, and health. Over time, however, they have broadened their focus to include environmental concerns, including but not limited to those related to agricultural environments (Langley, 2021). Research in the sociology of finance has made significant strides in examining this increasing concern of VCs with environmental issues. Pioneering studies have analyzed the “discursive strategies” (Kish & Fairbairn, 2017), the “spirit” (Goldstein, 2018) and the “knowledge regime” (Golka, 2024) through which these companies promote their interests, and have criticized how they advance the “financialization” (Van der Zwan, 2014) of nature. In my paper, I extend these studies by exploring a hitherto under-researched aspect of VCs concerned with environmental “impact”: the question of whether a qualitative change in the way such firms account for the environment can actually be observed in their practices. As such, the article aligns with an emerging debate that shifts the focus from a one-sided examination of the “economization” (Çalışkan & Callon, 2009) of the environment to a more reciprocal analysis that also considers the “environmentalization” (Violle, Cointe, Mertens, forthcoming) of economics. Empirically, the chapter examines this question by analyzing how a German venture capital firm incorporates the environmental science method of “life cycle assessment” into its investment process. The chapter identifies three “political” (cf. Winner, 1980) effects resulting from this environmentalization of VC: first, a redefinition of the boundaries of VC expertise; second, a strengthening of the power of VCs over the future development of startups and their technologies; third, a blending of the environmental and economic “value” of startups, and thus a “de-risking” of these startups as investment objects.