Sustainable Entrepreneurship - ESG Measurement, Valuation, and Performance in Token Offerings

Link to the SSRN

Abstract:

Sustainable Entrepreneurship (SE) targets profitability and sustainability goals. A major research gap concerns SE's economic attractiveness for entrepreneurs and investors. The question is ambiguous because sustainability orientation creates costly constraints, while startups cannot fully appropriate the rents from their positive externalities. We propose a machine-learning approach to measure Environment, Society, and Governance (ESG) properties from text data, and relate these properties to startup valuation and performance. First, startups with salient ESG goals achieve higher valuations, suggesting that sustainability orientation is financially attractive for the entrepreneur. Second, long-term investor returns are lower than in conventional startups, reflecting investors' willingness-to-pay for sustainability-related, non-financial returns. Third, consistent with the notion that sustainability orientation creates costly constraints, we find that valuation and performance effects are weaker in startups with high degrees of technological, network, and governance formalization.


Online ESG scorer

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