Why Investors Ask About ESG During Startup Fundraising And How to Prepare
“I’m looking for insight into a potential investment scam I’ve encountered…,the company must obtain an ESG (Environmental, Social, and Governance) Certificate or policy. The investor claims this is mandatory and must be paid by the company, but something about it feels off.”- a question shared by an early-stage founder online
Yes, this may indeed feel suspicious, because most fundraising advice never really prepares you for a conversation like this.
You expect discussions around product, traction, and revenue, not ESG requirements. Which naturally leads to the question: since when did this become part of fundraising?
It’s a fair question, especially when ESG still feels far removed from what most startups are actually building.
The reality is that investors aren’t suddenly expecting every startup to become a sustainability company.
It’s just that the way they evaluate businesses has expanded beyond growth alone to include long-term risk, governance, and resilience. Because investors are under pressure by regulations and their lenders to ensure they are being environmentally and socially responsible with their investment choices.
And that’s where ESG enters the picture, though not always in the formal or certification-heavy way it’s often assumed to be.
In this blog, we’ll break down why ESG has become part of fundraising, what investors are actually looking for, whether you really need a certification, and how to prepare your business without wasting time or money on the wrong approach.
“Do I actually need an ESG certificate?”
This is usually where founders start overthinking.
When ESG comes up in a fundraising conversation, it’s easy to assume you’re being asked to obtain a formal certificate. After all, there are dozens of ESG frameworks, reporting standards, regulations, and certifications, and it’s easy to feel like you need to understand all of them.
The good news is that, for most early-stage startups, investors aren’t expecting you to master every ESG framework or obtain a certification.
More often, they simply want founders to start engaging with ESG and understand what it means for their business.
If you’re wondering where to begin, we can connect you with an ESG consultant who understands your industry and location. They can help you focus on what matters most instead of getting overwhelmed by every framework and regulation. Simply fill out our consultant matching form here.
Because the confusion often comes from the fact that ESG is an umbrella term. It covers governance, sustainability, risk management, and reporting, making it sound far more formal and standardized than it usually is for an early-stage company.
In reality, what investors are often assessing is whether your startup has good governance, understands its key risks, and is building a business that can scale responsibly. What that looks like will vary depending on the investor, industry, and stage of the company.
What investors are actually looking for in ESG due diligence?
To understand ESG properly, it helps to step into the investor’s perspective for a moment.
Very few investors are choosing companies based on who cares about sustainability the most. Almost every founder can say that, if they don’t have to cite proof. It’s not a stretch to say- some founders even highlight how they wrote essays about the environment when they were in school.
What actually matters is what’s visible beyond the pitch.
One founder might describe responsibility in broad terms. Another might be able to clearly explain how decisions are made, how risks are tracked, how suppliers are managed, and how compliance actually works inside the business.
That difference is what investors are really paying attention to.
ESG due diligence is not just about labels or certifications at this stage. It’s about understanding whether the founders have thought beyond rapid growth and have a clear direction for building a business that is well-governed, compliant, and prepared for future challenges.
And when you see it this way, ESG becomes less of an external requirement and more of a way investors assess whether a company is ready for scale, scrutiny, and the operational complexity that comes with success.
Which ESG certifications actually matter?
Once you look at ESG through that lens, the picture becomes much simpler.
Instead of a single fixed requirement, ESG expectations shift depending on stage and industry. Here’s a simple breakdown to make that clearer:
| Type of company | What ESG looks like in practice | What actually matters |
| Startup / early-stage | Basic governance awareness, informal internal policies | Usually no certification required. Sometimes lightweight internal ESG policy is sufficient |
| SME / growing company | Structured ESG reporting | GRI reporting framework, EcoVadis assessments in supply chains |
| Institutional funding stage | Standardized investor-grade ESG reporting | ISSB (IFRS S1 & S2) aligned reporting (global baseline) |
| Manufacturing / supply chain | Environmental management systems | ISO 14001 certification for environmental control systems |
| Construction / infrastructure | Environmental impact + compliance tracking | ISO 14001 + regulatory reporting (project-based) |
| SaaS / tech | Governance + data + compliance focus | No ESG certification typically, focus on governance and data security |
What this shows is simple: ESG is not a single requirement, it becomes more formal as a business grows.
Early-stage companies are usually dealing with awareness and structure. Larger companies move into reporting. Highly regulated industries eventually formalize it through systems and certifications.
But none of this starts with certification. It evolves into it when the business context demands it.
How to prepare before paying for any certification?
Once you understand how ESG expectations actually show up in fundraising, the next question becomes more practical: what should you actually do about it?
In most cases, ESG readiness starts much earlier.
First it begins with clarity, understanding what actually matters in your business. Not every environmental or social factor is relevant, and investors don’t expect everything to be tracked.
If you’re unsure where to begin, getting the right guidance from someone familiar with your industry can help you focus on what’s actually relevant for your business.
From there comes ownership. Someone within the business should be responsible for ESG-related thinking, even if it’s only one part of their role. Without clear ownership, these conversations tend to remain fragmented.
The next step is visibility. That doesn’t mean producing lengthy sustainability reports. It simply means knowing where important information lives, whether it’s related to operations, compliance, employee practices, or supply chains, and understanding what investors are likely to ask about.
This is similar to how startups work with lawyers or chartered accountants. Most companies don’t hire them full-time in the early days; they bring them in when expertise is needed. ESG can be approached in much the same way: seek guidance when necessary, build the right foundations, and expand your approach as the business grows.
Only after this foundation exists does it make sense to move toward formal frameworks or certifications.
Because at that point, you’re not guessing what needs to be documented. You’re simply formalizing what already has structure.
How to get ESG-ready?
So where does all of this leave you?
If you’re an early-stage founder, you probably don’t need to rush into certifications. What matters far more is understanding how your business operates, where your biggest risks lie, and whether you have the basic structures in place to manage them.
As your company grows, your ESG expectations will grow with it. But if you build that foundation early, adapting to new requirements becomes much easier than trying to bolt everything on later.
And if ESG is starting to come up in fundraising conversations, getting the right guidance early can help you focus on what actually matters for your business.
We can help you connect with the right sustainability expert who can guide you in the right direction.
For founders in the climate space specifically, there’s another common challenge, which is figuring out where to actually find the right opportunities. To make that easier, we’ve also put together a short 3-minute quiz that matches climate tech startups with only relevant grants, incubators, and accelerators where they have a higher chance of being a fit.
