The Impact of Social and Environmental Practices on Funding Outcomes for Corporate Founders

Abstract

Environmental, Social, and Governance (ESG) considerations have gained increasing importance in shaping financing decisions, particularly for founders seeking access to external capital. This study investigates the impact of the environmental and social dimensions of ESG on the funding received by founders in India by adopting a quantitative research design. Primary data were collected through structured questionnaires administered to 72 founders of small, medium, and large enterprises. The data was analysed using Structural Equation Modelling (SEM) with the Diagonally Weighted Least Squares (DWLS) estimator. The measurement model demonstrated satisfactory sampling adequacy, with a Kaiser–Meyer–Olkin (KMO) value of 0.762 and a significant Bartlett’s test of sphericity (?² = 599.8, p < 0.001), confirming the suitability of the data for factor analysis. Overall model fit was acceptable to strong, as indicated by a Comparative Fit Index (CFI) of 0.970, Tucker–Lewis Index (TLI) of 0.955, and a Standardized Root Mean Square Residual (SRMR) of 0.067. Additionally, the Root Mean Square Error of Approximation (RMSEA) value of 0.094 suggested potential scope for model refinement. The structural results reveal a positive association between environmental performance and funding while environmental and social dimensions were also strongly interrelated. Overall, the findings suggest that stronger environmental and social ESG practices are associated with improved funding outcomes for founders with environmental practices demonstrating a relatively stronger influence.