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ESG — Purpose, with a Profit

Picture of Oliver Platt

Oliver Platt

Product and Marketplace Manager

The business ecosystem is increasingly growing conscious of the footprint and the impact it creates globally. As consumers and companies grow aware of the triple bottom approach- the philosophy that environmental and social concerns should be of equal concern as profits, ESG practices are beginning to assume a strategic importance. The US Senate recently passed the Inflation Reduction Act, that includes a $369bn package for climate action — the largest investment in the issue in US history. It dedicates billions to efforts that speed up the production of clean technology such as solar panels and wind turbines. Households that purchase electric cars will also be given tax credits. The authors of the bill say it will cut the country’s carbon emissions by 40% by 2030. Globally, governments, industries and people understand and acknowledge the impact of ESG metrics including climate change, social inclusion, and good governance. ESG policies allow for mitigation techniques to be adopted and resources to be placed in the hands of those committed to making a change.

How does ESG help?

According to a Morgan Stanley survey, investor enthusiasm in sustainable investing is at an all-time high with more than 85% of US investors and 95% of millennials showing interest in sustainable investing strategies. This is attributed to several factors like the legally binding nature of the Paris Climate Deal, approaching deadline for implementation of Sustainable Development Goals and the impact of global warming literally being felt.

The Paris Climate Accord has urged countries to take effective steps in climate action and carbon neutrality. With large companies and governments being a stakeholder in ESG dynamics, embedding ESG policy and ESG reporting into regular convention is likely to be mandatory and the new normal. These practices target tracking greenhouse gas emissions, natural resource management and conservation, and the firm’s overall resiliency against physical climate risks.

The ‘Social’ aspect of ESG involves transitioning and aligning with society’s goals like DEI (Diversity, Equity, Inclusion) and approaching it from all angles, ranging from diversity of representation at work to income parity between genders to financial inclusion (finclusion). Social movements like Black Lives Matter, LQBTQ+ rights and Women rights have put underrepresented communities at the centre of policies aiming for equality and equity in opportunities and employment.

The ‘Governance’ parameter of ESG reflects how an organisation is led and managed. It promotes fairness, transparency and accountability by gauging and reviewing incentives, stakeholder expectations, shareholder rights and other factors that make governance more participatory and democratised.

In a report, ‘Fintech and Sustainable Development’, the United Nations Environment Program (UNEP) compares the connection between fintech and sustainable development to the double helix structure of DNA, signifying the need for fintech ecosystem to come together and collaborate to achieve these objectives.

How can fintechs help?

Fintechs can play a pivotal role in accelerating the implementation of ESG policies in large organisations. Being data driven enables fintech organisations to be efficient, consumer centric, responsive and therefore are well positioned to manage and drive impact qualitatively and quantitatively. Technology also helps bring real outcomes to light and implement effective solutions. Products and services that are oriented toward ESG use real time data, rating engines, inclusion initiatives and measurement tools to:
  • Incorporate ESG issues into investment analysis and decision-making processes.
  • Seek appropriate ESG reporting and disclosures
  • Promote the acceptance and implementation of the principles within the investment industry effectively
Businesses have the opportunity to embed ESG policy into supply chains, vendors, clients, colleagues and operations at large, within and outside the organisation and embrace sustainability in financial services.

What does it mean for you?

It has been observed that companies with value driven objectives like ESG lead to better performance across all dimensions, including economic and social objectives. They are placed at a comparative advantage with resources dedicated to sustainability and hybrid organising- setting, managing and monitoring social and financial goals at all times. ESG practices help clients:

  • transition to a low carbon footprint
  • implement corporate sustainability and corporate social responsibility objectives which will drive ESG based initiatives
  • ensure good organisational and leadership practices where all employees take ownership of their work and go a step ahead to contribute to the vision of the organisation.

Improved ESG performance also makes companies better prepared to manage any future regulations and innovation surrounding ESG parameters. Companies with ESG values may experience better client, customer retention and positive brand recognition. Fintech partnerships offer organisations the most frictionless and speedy way to integrate ESG practices into their culture and operations.

This is an opportunity for governments, organisations and all ecosystems and communities to take on board ESG practices to become more sustainable, successful and responsible towards the planet, communities and their core values.

ESG in a box by NayaOne improves your ESG posture using some of the most innovative technologies that are accessible via the NayaOne Marketplace and can be evaluated in the NayaOne Digital sandbox environment.

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