Fintech Insights

It’s time to see ESG as a competitive advantage

Tony Warren | EVP head of Strategy and Solutions Management, FIS

October 03, 2022

How do you view the booming ESG market? Do you think it’s a passing fad or a burden on top of all the other things on your mind? Or are you viewing ESG as a competitive advantage?

You should be.

ESG was once seen as a niche strategy that limited returns. Well, we can now see that the ESG impact on returns is often positive – not to mention critical to capturing the growing number of investors who are putting ESG front and center when they decide where to invest. So, capital markets firms have good reason to want to drive ESG forward. But how does the industry do that? Listen to my podcast to discover the two areas that the industry needs to support.

Prefer reading to listening? Check out the transcript below.

What can capital markets firms do to drive ESG forward? Let's think of it, firstly, from an industry perspective around standards.

So I think there are a couple of things from an industry perspective that we need to continue to support in tandem. First of all firms need to continue to push for and to support transparency of data. Data is the key to everything these days, you can pretty much get a good sense of whether a company is serious about ESG by taking a look at their website and their ESG disclosures.

If they're providing detailed, attributable information and reporting, this tells you something versus other companies that casually mention things or speak in broad terms. The more we are able to quantify and standardize ESG data, the better we will be able to drive ESG initiatives forward, including standards for rulemaking.

This comes to the second item, continued engagement with the trade groups and organizations driving towards regulation and rule frameworks.

Right now, there are many, let's say, cooks in the kitchen. And when it comes to ESG, getting consensus and industry standards are difficult when things are in such a disparate state.

However, progress is being rapidly made with the recent SEC climate disclosures requirement and now the new transparency of data proposal.

So, we're perhaps starting to see in the U.S., as we've already seen in Europe, how regulation will drive and perhaps force the need for transparency from firms in the capital markets. Regulation is only going to continue here and we will be a major driver to push ESG forward in the coming years.

At FIS, we continue to be highly engaged with all of the above to help our clients best prepare for the coming changes. So, embrace ESG and begin to transform your business and processes around it.

This is the advice I give to our clients. ESG is not going away and the best way to gain a competitive advantage is to embrace the principles we have just discussed around transparency and reporting.