How ESG is driving the payments industry towards a sustainable future

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How ESG is driving the payments industry towards a sustainable future

Many businesses have adopted Environmental, Social and Governance (ESG) practices into their operations. 

In 2021, ESG in payment deals were worth USD 1.5 billion, a sign of growing importance amid environmental challenges. Consumers of today seek companies that reflect their values, pushing corporate decision-makers into a path of sustainability, whether or not it be necessary. As a result, global sustainable investment now tops USD 30 trillion - up 68% since 2014 and tenfold since 2004.

E is for Environment

The E in ESG refers to environmental criteria, the energy a company uses and the waste it discharges. It also encompasses carbon emissions and climate change, an issue that is as important to global leaders as it is to the man on the street. In recent years, some financial institutions have committed to reducing carbon emissions.

For example, Aspiration Bank, a US-based online-only fintech, offers a “Spend and Save” cash management account where the funds don’t go to oil and gas projects. 

Visa, the global digital payment provider, has said it has achieved carbon neutrality in its operations. It has also transitioned to 100% renewable electricity. In addition, Visa claims it chooses partners who share its sustainability goals. 

This has a trickle-down effect on cross-border payment aggregators that are starting to prove that they, too, are committed to reducing emissions by turning to intelligent infrastructure and systems.

S is for Social Responsibility

The S in ESG stands for the social aspect, the length a company goes to responsibly reach out to the community it serves. Financial inclusion is a significant component of this pillar. It calls for an equal opportunity for people and companies to access affordable and sustainable financial services.

One of the examples is digital wallets. Even an unbanked person can create an e-wallet account that allows them to make and receive payments. In addition, some digital wallets, like the Touch ‘n Go eWallet, possess remittance capabilities, allowing users to send money back to their home countries. This greatly improves the quality of life of not just the users, but their dependents. 

In the B2B industry, cross-border payment companies are turning to innovation to make it easier and cheaper to send and receive money.

G is for Governance

The G refers to governance, a company’s internal system of practices, controls and policies. Strong corporate governance allows a company to make effective decisions, comply with the law at all times and meet the needs of external stakeholders. Examples of internal governance are regulatory compliance, risk management initiatives, rules on corruption, bribery, conflicts of interest and whistleblowing programmes.

Besides being literally a regulatory requirement, governance is important because it allows a company to build and maintain its reputation and trust with its stakeholders. In cross-border payments, strong governance enables financial institutions and fintechs to be transparent, accountable and sustainable, ensuring the stability of the payment ecosystem.  

Looking ahead

In essence, ESG practices compel businesses to mind their environmental impact, be champions of social inclusion and set an example of good governance. ESG does not mean the detriment of success either, so companies can and should be profitable while being responsible members of the global community.

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