The theoretical framework of this research is based on the Theory of the financial risks of venture capital investments in the implementation of the SDGs. Its main scientific provisions are as follows:
- Venture capital investments are a mechanism of the support of the SDGs in business within the manifestation of corporate social responsibility (Höcht et al., 2021; Liu et al., 2021; Zhao, 2021);
- Supporting the SDGs is the priority of venture capital investments (though it is not always the main goal) (Aich et al., 2021; Endovitsky et al., 2021; Oldford et al., 2022; Park and Jang, 2021);
- The criterion of the classification of venture capital investments from the standpoint of its consequences for the SDGs is the character of venture capital investments. This character envisages the differentiation of responsible (providing positive consequences for the SDGs) and irresponsible (causing negative consequences for the SDGs) investments (Alda, 2021; Cao et al., 2022; Folqué et al., 2021; Jackson, 2021; Quang et al., 2022; Sciarelli et al., 2021; Zhang et al., 2021).
This allows characterising the level of elaboration of the issues of corporate social responsibility during the implementation of venture capital investments to support the SDGs as high. The content analysis of the scientific literature has shown that it distinguishes an important role of private business in the achievement of sustainable development and acknowledges the business’s capability to contribute to the implementation of each of the 17 SDGs.
The answers to the set research questions in the existing literature and its gaps (disadvantages, limitations of the existing answers) are presented in Table 1.
According to Table 2, both set research questions are complex. That’s why, for the fullest and clearest reflection of answers to them in the existing literature, a thorough detalization with the help of specifying sub-questions is performed.
Within RQ1, there is the following sub-question: what defines the consequences of venture capital investments for the SDGs? The existing answer in the existing literature implies that the consequences of venture capital investments for the SDGs are defined by the character of venture capital investments: responsible investments cause positive consequences for the SDGs, and irresponsible cause negative consequences (Brunen and Laubach, 2021; Indriastuti and Chariri, 2021; Sandhu et al., 2021; Stephenson et al., 2021). A gap in the literature (drawback, limitation of the existing answer) is the unpredictability of the consequences of venture capital investments for the SDGs at the stage of their planning and dispose.
Within RQ1, there is the following sub-question: how do venture capital investments influence the financial risks of the SDGs. The answer in the existing literature implies that the reduction of responsible investments and/or increase in irresponsible investments raise the financial risks of the SDGs (Folqué et al., 2021; Gambetta, 2021; Khan et al., 2021; Maxfield and Wang, 2021). A gap in the literature (drawback, limitation of the existing answer) is the complexity or even impossibility for the quantitative measuring of the impact of venture capital investments on the financial risks of the SDGs.
Within RQ2, there is the following sub-question: what was the effect of the COVID-19 pandemic and crisis on the financial risks of the SDGs from the standpoint of venture capital investments? The answers in the existing literature imply that, on the one hand, the COVID-19 pandemic and crisis led to the reduction of the financial risks of the SDGs due to the growth of responsible investments (Doni and Johannsdottir, 2021). But, on the other hand, there is a negative effect of the COVID-19 pandemic and crisis on venture capital investments (disorientation) and the SDGs, which increases their financial risks (Arribas-Ibar et al., 2021; Kwak and Kim, 2021). A gap in the literature (drawback, limitation of the existing answer) is the contradiction of the existing literature and the absence of the unambiguous answer to the RQ.
Within RQ2, there is the following sub-question: what does risk management of the SDGs from the standpoint of venture capital investments imply? The answer in the existing literature implies that risk management of the SDGs from the standpoint of venture capital investments envisages the stimulation of responsible venture capital investments to support the SDGs (Cupriak et al., 2020; Inshakova et al., 2021; Laurel-Fois, 2018; Parfitt, 2020; San Martin et al., 2021). A gap in the literature (drawback, limitation of the existing answer) is that this recommendation is qualitative, due to which it is difficult for practical implementation.
For the purpose of filling the above literature gaps and overcoming its limitations and disadvantages and providing the most precise answer to the research questions, the authors of this paper propose and substantiate a new (additional) criterion of the classification of venture capital investments from the standpoint of their consequences for the SDGs – the object of venture capital investments (the thematic block of the SDGs).
Research Design And Method
The above research questions, proposed hypotheses, and the stated objective predetermined the logic and structure of this research. In the first part, an analysis of the impact of venture capital investments on the SDGs from the standpoint of the financial risks is performed. To test the hypothesis H1, the authors find the dependence of the results in the sphere of implementation of each of the 17 SDGs (according to the materials of the UN, 2021; given as SGS) in 2021 on venture capital investors (deals - vi), according to the materials of “The Global Innovation Index” of the WIPO (2021) in 2021. The method of regression analysis is used to create 17 (for each SDG) simple regression models with one regressor of the following form:
SGS = σ + λxvi
The advantages of the selected indicators are as follows: first, they describe statistically (in the most precise and detailed way) the selected subject sphere of the research; second, they are taken from reliable sources, which guarantees the reliability of the results and the following conclusions. Third, they have the same measuring units (they are measured in points (score) from 0 to 100), which ensures the full compatibility of the research results and the absence of contradictions and errors in their treatment.
The choice of the method of regression analysis is explained by it not only allowing for precise results but ensuring their multifunctionality – the results of the regression analysis could be used for the following:
- Finding the presence and level of connection of the indicators (with the help of the coefficient of correlation, R2);
- Finding the impact of the factor variable (vi) on the target function (SGS) and the quantitative measuring of this impact (with the help of the regression coefficient);
- Checking the reliability of the results of the economic and mathematical modelling (regression models) (with the help of the significance level, α), which allows selecting reliable models and continuing the research using only them.
For the qualitative treatment of the obtained quantitative results, the method of logical analysis and systematisation is used. The differences between the consequences of venture capital investments for the SDGs of different thematic blocks are found. The hypothesis H1 is deemed proved if positive and negative values of the coefficients of regression are obtained, which will demonstrate the different character of the consequences (positive consequences at the positive coefficient of regression and negative consequences at the negative coefficient of regression) of venture capital investments for the SDGs.
In the second part of this research, the change of the financial risks of the SDGs from the standpoint of venture capital investments under the impact of the COVID-19 pandemic and crisis is evaluated. To test the hypothesis H2 the method of the horizontal analysis is used for finding the change of venture capital investors (deals: vi) according to the materials of “The Global Innovation Index” of the WIPO (2021) in 2020 compared to 2019, and in 2021 compared to 2020.
The change of the results on the SDGs that do not depend on venture capital investments is compared to the results on the selected SDGs that have positive dependence on venture capital investments. Also, the method of correlation analysis is used to specify the connection between the percentage change (growth) of the results in the sphere of implementing each of the 17 SDGs (∆SGS) and the percentage change (growth) of the results of venture capital investors (∆vi). The coefficients of correlation are calculated (R∆SGS,∆vi). The variation (v) of the growth among countries and the SDGs, as well as coefficients of correlation among the SDGs, is calculated. The hypothesis H2 is deemed proves if:
- Countries with negative dynamics (outflow: ∆vi < 0) of venture capital investments and countries with positive dynamics (inflow: (∆vi > 0)) of venture capital investments are identified, and their variation among all considered countries exceeds 50 (vC>50), which would prove the differences among the consequences for countries;
- there are negative (R∆SGS,∆vi < 0) and positive (R∆SGS,∆vi > 0) coefficients of correlation between the percentage change (growth) of the results in the sphere of implementing certain selected (with positive dependence on venture capital investments) SDGs (∆SGS) and the percentage change (growth) of the results of venture capital investors (∆vi), as well as of the variation of these coefficients exceeds 50% (vR>50), which would prove the differences among the consequences for the SDGs).
The research is performed using the full sample of 62 countries for which there are data on the achievement of each of 17 SDGs (in the materials of the UN, 2021) and data on venture capital investors (in the materials of WIPO, 2021). Representativeness of the sample is ensured by it containing countries from different parts of the world and countries with different incomes and rates of economic growth. Due to this, the sample rather truly reflects the situation in the economy on the whole, which makes the results and conclusions that are based on it true and fair at the global scale. The sample is provided in the Supplementary Materials (Table A1).
Findings
Analysis of the impact of venture capital investments on the SDGs from the standpoint of the financial risks: testing of the hypothesis H 1
The impact of venture capital investments on the SDGs from the standpoint of the financial risks is reflected by the models of simple regression. Their main parameters are shown in Table 2.
Results of the regression analysis from Table 2 identify 10 reliable models. However, two of them (model SGS12 and model SGS12) demonstrated a negative effect of venture capital investments on the implementation of the SDGs. That’s why these two models shall not be further considered. This allows selecting 8 reliable models that describe mathematically the positive effect of venture capital investments (reduction of the financial risks) on SDGs 1, 3–5, 8–11, and 16. All of them are non-environmental and so the selected SDGs are packed in this paper into one socio-legal and economic block.
Since positive and negative values of the coefficients of regression were received, hypothesis H1 is proved. This is a sign of the different character of the consequences of venture capital investments for the SDGs. From the standpoint of financial risk and corporate social responsibility, it is possible to treat the obtained results in the following way. Venture capital investments act as follows:
- Stimulate the achievement of the SDGs of the socio-legal and economic block. The reduction of venture capital investments raises the financial risks of the selected SDGs (of this block). Manifestation of corporate social responsibility in business implies the increase in venture capital investments in the practical implementation of the SDGs 1, 3–5, 8–11, and 16 (the focus of venture capital investments on this block);
- Do not contribute to the implementation of most (SDGs 2, 6, 7, 17) SDGs of the economic block. The change of venture capital investments does not have a significant effect on the financial risks of these SDGs. Manifestation of corporate social responsibility in business envisages either the search for alternative mechanisms of the support of the SDGs 2, 6, 7, and 17 or correction of venture investment projects, which are aimed to support these SDGs to increase responsible investments;
- Restrain the implementation of SDGs 12–15, which are unified in a special – nature and climate – sub-block within the environmental block. An increase in venture capital investments raises the financial risks of the selected SDGs 12 and 13 but does not have a significant effect on the financial risks of the SDGs 14 and 15. Manifestation of corporate social responsibility in business envisages a serious reconsideration of venture investment projects, which are aimed to support SDGs 12–15 to increase the responsibility of investments;
Assessment of the change of the financial risks of the SDGs from the standpoint of venture capital investments under the impact of the COVID-19 pandemic and crisis: testing of the hypothesis H 2
To assess the change of the financial risks of the SDGs from the standpoint of venture capital investments under the impact of the COVID-19 pandemic and crisis using the method of the horizontal analysis, the change of venture capital investors in 2020 compared to 2019, and in 2021 compared to 2020, is calculated. The results on countries in which the decrease in venture capital investments is observed are given in Table 3. Calculations for the full sample of countries are provided in the Supplementary Materials (in Table A2).
Results of the horizontal analysis (Table 3) shows that the reduction of venture capital investments in 2020 (compared to 2019) took place in 32 (51.61%) countries (out of 62 countries of the sample), and in 1 country (Vietnam) venture capital investments remained unchanged. The aggregate share of countries in which the COVID-19 pandemic and crisis increased the financial risks of the achievement of the SDGs of the socio-legal and economic block (SDGs 1, 3–5, 8–11, and 16) in 2020 equals 53.23%. That is, most countries in 2020 faced the growth of the financial risks of implementing the SDGs the socio-legal and economic block under the impact of the COVID-19 pandemic and crisis. The coefficient of variation of the change of venture capital investments in 2020 was very high – 332.17%.
In 2021, the reduction of venture capital investments (compared to 2020) took place in 4 (6.45%) countries (out of 62 countries in the sample), and in 6 (9.68%) countries venture capital investments remained unchanged. The aggregate share of countries in which the COVID-19 pandemic and crisis increased the financial risks of the achievement of the SDGs of the socio-legal and economic block (SDGs 1, 3–5, 8–11, and 16) in 2021 equals 16.13%. That is, most (83.87%) countries in 2020 faced the growth of the financial risks of implementing the SDGs of the socio-legal and economic block under the impact of the COVID-19 pandemic and crisis, while the financial risks of the achievement of the SDGs of this block grew in 16.13% of countries. The coefficient of variation of the change of venture capital investments in 2021 was very high – 143.81%.
The change of results on the SDGs that do not depend on venture capital investments is compared to results on the selected SDGs that have positive dependence on venture capital investments in Table 4. The method of correlation analysis is used to find the connection between the percentage change (growth) of results in the sphere of implementing each of 17 SDGs (∆SGS) and the percentage change (growth) of results of venture capital investors (∆vi). The correlation coefficients are calculated: R∆SGS,∆vi.
The results from Table 4 allow for the following conclusions. In 2020, the results of the achievement of the SDGs of the whole environmental block grew by 1.87%. Certain results of the SDGs of the economic block that do not depend on venture capital investments (SDGs 2, 6, 7, and 17) were reduced by 0.1%. Certain results of the SDGs of the nature and climate sub-block within the environmental block (SDGs 12–15) grew to a larger extent: by 3.83%. However, the results of the achievement of the SDGs of the socio-legal and economic block (selected SDGs: SDGs 1, 3–5, 8–11, and 16) are more clearly expressed: 3.87%.
The achieved positive results for the SDGs of the socio-legal and economic block are by 4.39% (medium correlation) explained by the change of venture capital investments. The arithmetic mean of the positive coefficients of correlation – on SDG 1 (23.45%), SDG 3 (28.99%), SDG 5 (7.81%), SDG 10 (15.53%), and SDG 11 (2.29%) – equalled 16.01% in 2020. On average, the volume of venture capital investments for the world grew by 1.15 times in 2020. Variation of the coefficients of correlation of the change of results on the SDGs of the socio-legal and economic block with the change of venture capital investments in 2020 was very high – 391.65%.
In 2021, the results of the achievement of the SDGs of the whole environmental block grew by 2.69%. Certain results of the SDGs of the economic block that do not depend on venture capital investments (SDGs 2, 6, 7, and 17) grew by 2.73%. Certain results of the SDGs of the nature and climate sub-block within the environmental block (SDGs 12–15) grew by 2.65%. The results of the achievement of the SDGs of the socio-legal and economic block (selected SDGs: SDGs 1, 3–5, 8–11, and 16) in 2021 were less clearly expressed: 0.19%.
The achieved positive results for the SDGs of the socio-legal and economic block cannot be explained by the change of venture capital investments (average correlation was not positive). The arithmetic mean of the positive coefficients of correlation – for the SDG 1 (10.62%), SDG 8 (5.61%), and SDG 16 (4.95%) was 7.06% in 2020. On average, the volume of venture capital investments for the world grew by 1.25 times in 2021. Variation of the coefficients of correlation of the change of results for the SDGs of the socio-legal and economic block with the change of venture capital investments was very high in 2021–179.26%.
Based on the results of the regression analysis (Table 2), it is established that an increase in the volume of venture capital investments from 26.18 points on average for the world in 2021 up to the maximum 100 points (+ 281.94%) will allow the significant acceleration of progress in the achievement of the SDGs of the socio-legal and economic block. This opens wide perspectives for financial risk management of the management of venture capital investments. This is demonstrated in Fig. 1.
As shown in Fig. 1, the maximum achieved advantages of financial risk management of the SDGs through the management of venture capital investments include the following:
- Increase in the result for SDG 1 from 86.66 points in 2021 to 100 points (+ 16.93%);
- Increase in the result for SDG 3 from 81.30 points in 2021 to 94.18 points (+ 15.84%);
- Achievement of the growth of the result for SDG 4 from 91.97 points in 2021 to 98.49 points (+ 7.08%);
- Increase in the result for SDG 5 from 67.96 points in 2021 to 78.88 points (+ 16.06%);
- Increase in the result for SDG 8 from 74.46 points in 2021 to 81.87 points (+ 9.96%);
- Increase in the result for SDG 9 from 63.50 points in 2021 to 86.82 points (+ 36.72%);
- Achievement of the growth of the result for SDG 10 from 57.73 points in 2021 to 73.62 points (+ 27.53%);
- Increase in the result for SDG 11 from 79.05 points in 2021 to 94.86 points (+ 20.00%);
- Increase in the result for SDG 16 from 74.19 points in 2021 to 86.32 points (+ 16.35%).
The arithmetic mean of the perspective growth for all SDGs of the socio-legal and economic block equals 18.50%.
The obtained results confirmed the hypothesis H2 and allow for the following conclusions:
- During the pandemic’s peak and the acute phase of the COVID-19 crisis, venture capital investments ensured a significant contribution to financial risk management of the achievement of the SDGs of the socio-legal and economic block. Due to this contribution, the results of the achievement of the SDGs of this block are more vivid compared to other blocks;
- In 2021, the general level of the financial risks of sustainable development reduced, which, accordingly, led to the reduction of the role of venture capital investments in the achievement of results for the SDGs of the socio-legal and economic block;
- The impact of the COVID-19 pandemic and crisis on the financial risks of the SDGs from the standpoint of venture capital investments is very different depending on the SDG and country;
- The increase in venture capital investments has a large potential for financial risk management of the achievement of the SDGs of the socio-legal and economic block.