Entrepreneurs’ use of ESG (environmental, social, and governance) as a strategic resource for securing funding

Abstract

Environmental, social, and governance (ESG) practices are increasingly promoted as drivers of firm performance and improved access to capital. However, limited empirical research examines how entrepreneurs themselves understand and communicate ESG-related resources when seeking external financing. Grounded in Barney’s (1991) Resource-Based View (RBV) and extended through ESG-oriented adaptations and Spence’s (1973) signaling theory, this study explores how entrepreneurs in British Columbia conceptualize ESG practices as strategic resources and attempt to leverage them in lending contexts. Using a qualitative research design, semi-structured interviews were conducted with 13 entrepreneurs from diverse industries across British Columbia. The study investigated three core research questions addressing how entrepreneurs communicate ESG-related resources to financial institutions, which ESG practices are perceived as strategic assets, and how these practices are believed to influence financing outcomes. Thematic analysis revealed that ESG capabilities - particularly environmental innovation, employee wellbeing, and community engagement - are deeply embedded within participating firms’ missions, values, and stakeholder relationships. Entrepreneurs frequently framed these practices as indicators of long-term resilience, risk mitigation, and ethical leadership. Despite this internal commitment, findings indicate that translating ESG resources into consistent financing advantages remains uneven. Many entrepreneurs lacked formalized metrics or standardized reporting mechanisms or the time needed to find funding, limiting their ability to signal ESG value credibly to lenders. Financial institutions were perceived to prioritize traditional financial indicators, with ESG considerations often treated as supplementary rather than decisive. As a result, information asymmetries persisted between entrepreneurs and lenders, constraining the strategic potential of ESG signaling. This study contributes to the literature by offering an entrepreneur-centered perspective on ESG as a strategic resource, through an RBV and signaling theory lens, highlighting gaps between ESG integration at the firm level and its recognition in financial decision-making. The findings suggest implications for entrepreneurs, financial institutions, and policymakers, emphasizing the need for clearer ESG frameworks, improved communication mechanisms, and greater institutional alignment to unlock the financing potential of ESG-driven resources.