Financing Sustainable Entrepreneurship: ESG Measurement, Valuation, and Performance
67 Pages Posted: 1 Jan 2022
Date Written: December 31, 2021
Sustainable Entrepreneurship (SE) seeks to attain profitability and sustainability goals. A major research gap concerns the economic attractiveness of SE for entrepreneurs and investors. The question is ambiguous because sustainability orientation creates costly constraints, while startups cannot fully appropriate their positive externalities. We relate startups’ Environment, Society and Governance (ESG) properties obtained from a machine-learning approach (www.SustainableEntrepreneurship.org) to SE valuation and performance in token offerings or initial coin offerings (ICOs). Startups with salient ESG goals are able to raise financing at more favorable valuations, incentivizing entrepreneurs to adopt ESG goals in the first place. However, their post-funding performance is weaker than in conventional startups, suggesting that investors incur a relative financial loss for backing sustainability-oriented entrepreneurs.
Keywords: Sustainable Entrepreneurship, Sustainability, ESG, Token Offering, Initial Coin Offering (ICO), Crowdfunding, Entrepreneurial Finance, Machine Learning
JEL Classification: L26, M13, Q01, Q56
Suggested Citation: Suggested Citation