ESG factors are increasingly important to investors, who have shifted their focus from traditional financial metrics to more holistic assessments of companies.
For many fintech firms, this means considering ESG early in the company’s lifecycle and taking a long-term perspective when investing in sustainable growth.
Fintechs must address challenges surrounding ESG
Fintech companies are increasingly being held to a higher standard than their traditional counterparts. That is mainly due to increased regulatory scrutiny. As a result, if your company operates in a jurisdiction where ESG reporting has been mandated by law or regulation, you’ll need to be able to demonstrate compliance with the relevant standards.
In addition, there are many examples where investors use ESG metrics as part of their investment decision-making process. For example:
- By creating funds that focus only on companies with high ESG ratings
- By requiring potential portfolio companies to have an established track record of meeting specific ESG standards before they’re allowed entry into those portfolios.
Fintechs are a new breed of companies with innovative ways of doing business. As a result, they can be very disruptive to traditional players in the industry.
Moreover, they must be empowered to grow and innovate at their own pace to challenge the status quo. Furthermore, fintechs bring about positive change through their products and services.
Considering ESG from the get-go
ESG is a buzzword synonymous with sustainable investing, but it’s not a new concept. ESG stands for environmental, social, and governance factors. And as you may have guessed from the name, all three categories can impact your investments differently. Plus, they can offer some profound benefits if done right.
However, suppose you’re new to ESG investing or are considering making it part of your fintech strategy (which we recommend). In that case, you might be wondering what it means to be “ESG-friendly” when it comes to fintech companies. Or how these concepts relate to each other at all.
All will be revealed in due time.
Ensuring equal opportunities
Ensuring equal opportunities for all your customers, regardless of race, age, gender, and other personal characteristics, is one of the core tenets of good customer service. However, it can be hard to guarantee that everyone will have an equal chance to use your service. Especially when some people may be using outdated devices that don’t work with your product.
The solution? Try making sure your platform works across different platforms and devices as much as possible (and without compromising on safety or security). That way, users are not excluded from access if they don’t have the latest model of smartphone or computer.
ESG is also crucial for consumers who want to know that their money is being used responsibly.
In summary, ESG and fintech have a lot in common. They both impact the world profoundly, and their success can be measured by how well they address these challenges.
ESG issues are often contentious, but it’s important to remember that there are many different ways to approach them. Each of those approaches will impact the environment, society, and economy.
For companies to succeed long-term, they must acknowledge these challenges from the start and build sustainability into their business models from day one!