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Vcs are becoming more concerned with ESG standards than Mere “Financial parameters” when supporting startups

Vcs are becoming more concerned with ESG standards than Mere "Financial parameters" when supporting startups

04 April 2024 – The change in investors’ focus towards environmental, social, and governance (ESG) rules is seen as a significant factor contributing to the financing slowdown in new-age enterprises during the funding winter experienced by the Indian startup ecosystem. In addition to financial considerations, investors these days are increasingly interested in sustainability, carbon reduction, and better working conditions for companies.

Even though the nation’s startup scene is severely lacking in capital and is experiencing a “funding winter,” it is still ranked third. Just $1.6 billion, or a 51 percent decrease, has reportedly been invested in Indian companies between January and March of this year, according to Tracxn.

Because it has led to ethical business practices, investors are now more interested in startups’ ESG performance than merely their financial viability, according to BK Sabharwal, Chairperson of the Capital and Commodity Market Committee at PHDCCI. “Incorporating environmental and social aspects from the planning and incubation stage can help startups attract better investments.”


Conclusion

He told LiveMint that startups may connect with their upstream and downstream value chains to further play an enabling role, better manage ecosystems, and cooperate for collective action. According to Shyam Menon, co-founder of Bharat Innovation Fund, several developmental financial institutions and organizations have committed their funds to ESG-related investments.

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