The Impact of ESG Strategies on Startups' Valuation

In light of recent societal demands, companies have needed to incorporate corporate governance mechanisms that encompass all their stakeholders in the value creation processes. Thus, Environmental, Social, and Governance (ESG) practices have been gaining widespread acceptance in the corporate world. However, little is known about the effects of ESG on the Valuation process of Startups. This study aims to fill this gap by conducting an online laboratory experiment in the United States with 300 professionals from the financial sector. When analyzing a Startup in the Agribusiness sector (AgroTech), the results indicate that good ESG practices have positive effects on external reputation perception, investor confidence in founders, growth projections, talent attraction and retention, and consequently, a higher Valuation for the Startup. These findings suggest that incorporating sustainable thinking into Startups' business models can generate considerable benefits for their survival.