Over the last few years, we have seen environmental, social, and governance (ESG) reporting frameworks grow in importance. This comes as more investors hold the opinion that companies which perform well on ESG are better positioned for the long-term. In the past, greenwashing was a huge issue, with inaccurate data being published for the public. Now with transparency increasing, other challenges have come up.
Below, we look at some of the challenges that fintech companies are now facing with regard to ESG.
Regulatory compliance
Regulations in this space are continuously updated, pointing to the need for fintechs to be up-to-date with these regulatory changes. Fintechs have to stay compliant and informed with these changes to maintain operational integrity and avoid penalties. Any mistakes in this space can be costly, both reputationally and financially.
Energy consumption
Fintech companies handle huge data volumes, which require high levels of computational power and leads to significant consumption of energy. Data centers also require constant power and cooling, which may increase carbon emissions.
Here, fintechs have to manage the environmental impact of energy consumption, which is a huge challenge.
Lack of reliable renewable sources of energy
While the adoption of renewable energy is a good idea, these sources of energy aren’t consistently available in every location and are also expensive. This has left many fintech companies relying on nonrenewable sources of energy to run their operations.
Need for data privacy and security
Fintech companies use a lot of data, which highlights the need to store the data safely and privately. Any violation can hurt a company’s reputation and customer trust, emphasizing the need to heavily invest in strong data protection.
Aligning an entire company’s goals with social impact
This is especially hard if, for years, the primary objective of a company has been generating additional profits. Here, fintech management teams are advised to use existing frameworks such as the Sustainable Development Goals and implement them into initiatives that add to the company’s success. It is important for leaders to consider initiatives that best align with their company’s missions.
Need for genuine values
For fintech companies to grow and stay relevant, genuine and strong values are needed as their foundation. Having strong values that incorporate ESG principles opens up fintechs to new opportunities while attracting and retaining investors as well as clients.
Focus on ESG in part, instead of a whole
Environmental impact is often at the forefront during discussions on ESG. While this is good, it is important for fintech companies to ensure that they focus on social and governance as well.
For companies that are primarily focused on mineral extraction, such as First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF), ESG challenges are mostly different from those faced by fintech. The challenges these companies face include how to minimize damage to the surface of the land where they have mining operations.
NOTE TO INVESTORS: The latest news and updates relating to First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF) are available in the company’s newsroom at https://ibn.fm/FSTTF
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