Financial constraints and sustainability in bioeconomy firms

Abstract

In the current scenario, sustainability has become vitally important. This paper focuses on bioeconomy as it links the economic systems and sustainable development, promoting innovative and environmentally friendly solutions. The bioeconomy firms need financial resources that play a critical role in their ordinary activities and in the activities that contribute to sustainability. The relationship between firms' ESG (environmental, social and governance) factors and their financing decisions has received little attention. Therefore, the objective of this article was to analyse the relationship between financial constraints and ESG performance focusing on bioeconomy firms. To carry out the analyses we have used 227 European bioeconomy firms developing three machine learning models. The main findings highlight the importance of the profitability (return on equity—ROE and return on assets—ROA) and the indebtedness in characterising firms' constraints, and the impact of non-disclosure of ESG results. The study emphasises the economic importance of ESG practices in enhancing companies' financial conditions and access to capital, by using their corporate strategy and management: non-disclosure of ESG information is related to an increase in funding constraints for listed bio companies. Thus, improving both economic and ESG performance can enhance access to capital, guiding business decisions.