Insights for sustainable business practices: Comparative impact of independent and corporate venture capital funding on financial and environmental performance

This study aims to analyze the effects of venture capital (VC) financing schemes on the financial and environmental performance of their VC-backed companies. This research leverages a dataset including 325 U.S. firms between 2002 and 2022 and examines two issues of interest: independent venture capital (IVC) and corporate venture capital (CVC) funding. The results show that IVC-backed companies have significantly better environmental, social, and governance (ESG) ratings and emit fewer greenhouse gases (GHG) emissions when compared to companies backed by CVC. This highlights that the function of IVC is to improve the environmental sustainability of businesses. Together this helps provide a valuable perspective about which VC models (CVC, IVC) does have an impact on how businesses pursue sustainability practices alongside financial performance. This paper contributes to the sustainable entrepreneurship literature by focusing on the importance of funding types with performing sustainable practices. This study aims to analyze the effects of venture capital (VC) financing schemes on the financial and environmental performance of their VC-backed companies. This research leverages a dataset including 325 U.S. firms between 2002 and 2022 and examines two issues of interest: independent venture capital (IVC) and corporate venture capital (CVC) funding. The results show that IVC-backed companies have significantly better environmental, social, and governance (ESG) ratings and emit fewer greenhouse gases (GHG) emissions when compared to companies backed by CVC. Also, the study results reveal that when compared to CVC backed companies, IVC-backed firms have a 22% superior ROE, 37% higher average in their ROA, and they also boasted of an average Tobin's Q with about 48%. This helps provide a valuable perspective about which VC models (CVC, IVC) does have an impact on how businesses pursue sustainability practices alongside financial performance. This paper contributes to the sustainable entrepreneurship literature by focusing on the importance of funding types with performing sustainable practices. • Analysis of 325 U.S. firms funded by IVC and CVC from 2002 to 2022. • IVC-backed companies exhibit superior ESG ratings compared to CVC-backed firms. • IVC-backed companies emit fewer GHG emissions than their CVC-backed counterparts. • Insights into how different VC models impact sustainability alongside financial performance. • Contribution to sustainable entrepreneurship literature by focusing on funding types and sustainable practices.