ESG continues to deepen, and the fintech industry is actively responding

Listing|WEMONEY Laboratory

Text: Jiang Linyan

In today's business world, ESG (Environmental, Social and Governance) has become the focus of attention for businesses and investors. In the fintech industry, this focus is even more special. With its strong innovation, rapid development and wide influence, the fintech industry is not only at the forefront of the changes of the times, but also in front of the daily life of the general public. Whether ESG affairs can be done well is not only related to the brand, market and reputation of fintech enterprises, but also to whether enterprises can obtain a long-term competitive position in the fierce market competition.

This article provides an in-depth analysis of the specific ESG performance of the fintech industry in 2023, and insights into the opportunities and challenges it faces.

ESG standards and applications continue to deepen

ESG standards and applications continue to advance steadily at home and abroad. Globally, with the International Sustainability Standards Board (ISSB) officially implementing the IFRS S1 and IFRS S2 ESG Disclosure Standards¹, the Global Reporting Initiative (GRI) continues to update the rules for corporate reporting topics, and the U.S. Securities and Exchange Commission (SEC) proposes to increase the in-depth disclosure of corporate information on climate change issues, the depth and breadth of corporate ESG information disclosure is gradually increasing.

Domestic stock exchanges have also intensively issued sustainability disclosure standards or guidance documents to guide listed companies to practice the concept of sustainable development. On April 12, 2024, the Shanghai, Shenzhen and Beijing Stock Exchanges officially released the final version of the Guidelines for Sustainability Reporting (Trial) of Listed Companies (hereinafter referred to as the "Guidelines"). As the Guidelines provide clear technical specifications and requirements for A-share listed companies, A-share listed companies are faced with both the mandatory action of ESG information disclosure and the standardization of the quality of ESG information disclosure.

In recent years, ESG topics have gradually become familiar to a wider general public, as issues such as generative AI technology ethics, climate change, and biodiversity have become widely discussed in society.

With its strong innovation, rapid development and wide influence, the fintech industry is not only at the forefront of the changes of the times, but also in front of the daily life of the general public. Whether ESG affairs can be done well is not only related to the brand, market and reputation of fintech enterprises, but also to whether enterprises can obtain a long-term competitive position in the fierce market competition. For listed fintech companies, they are also facing a "triple jump" development trend of investing more resources and time, from "disclosure for information disclosure", to "ESG performance improvement based on ESG ratings", and then to "surpassing ESG ratings and returning to ESG strategies".

The strategic perspective responds to the ESG development of enterprises

Responding to the needs of corporate ESG development from a strategic perspective has been gradually reflected in some domestic fintech industry enterprises. For example, in its sixth annual Environmental, Social and Governance Report recently released, VCREDIT disclosed that it has established an ESG development strategy of "one core, two engines, and three directions", that is, to provide reliable financial technology services as the core, driven by technology and data, and to build responsible, warm and sustainable responsible governance as the direction, firmly promote sustainable operation, and contribute to sustainable development. VCREDIT is focusing on promoting the ESG strategy as an implementation framework and action guide for sustainable development, formulating and improving a number of relevant management systems and implementation rules accordingly, and fully integrating 16 important sustainability issues such as information security and privacy protection, fintech innovation, compliance operations, business ethics, and customer service quality into its daily operations, so as to continuously improve the systematization and effectiveness of ESG management.

The fintech industry focuses on a wide range of ESG issues

In 2023, the consumer protection work in the fintech industry ("consumer protection work") has reached a new level, and industry leaders have pushed consumer protection work to a new pattern of sophistication, systematization and detail. According to the 2023 Consumer Rights Protection Annual Report released by Ant Group, in the past year, the Group has continued to improve the Group's consumer rights protection system and work with the industry to promote the healthy development of the consumer protection ecosystem. In June 2023, VCREDIT upgraded its consumer rights protection work and announced the establishment of a Consumer Rights Protection Committee, chaired by the Chief Executive Officer (CEO), to comprehensively coordinate the consumer protection work of the Group and its business lines, promote key tasks such as system construction, business integration, internal and external publicity and education, and black industry governance, continuously promote the systematization of consumer protection work, and consolidate the protection of consumer rights and interests.

Information security protection is an important responsibility of fintech enterprises and a must to achieve high-quality development of the industry. With the "Data Security Law", "Data 20" and other policy documents clarifying the basic principles and work requirements of data security, it will help the fintech industry to break through the industry pain points that are difficult to balance between data and information integration applications and security protection. Fintech companies need to continue to "cultivate internal skills", build an "iron wall" to ensure information security, and finally hand over satisfactory information security protection answers. In 2023, the company focused on building an internal information security governance structure to lay a solid foundation for building a security barrier from the management level, and Lexin's focus in 2023 was on the construction and improvement of the data security management system. In 2023, VCREDIT established an Information Security Management Committee to promote the systematic development of information security. Through the online deployment of the "Shadowless Cloud" system, a network security defense-in-depth defense system has been created and consolidated to achieve full-process information security protection. In addition, it also automatically monitors and reports suspicious data transactions through a special black and gray industry transaction intelligence monitoring system to ensure information and data security to the greatest extent.

Innovation and empowerment are important driving forces to promote the digital and intelligent transformation of the financial industry. According to the report, the integration of technology-enabled finance has obvious characteristics, and the application level of blockchain, privacy computing and security technology has been significantly improved, and the proportion of comprehensive technology empowerment has increased from 42% in 2022 to 50% in 2023. Over the years, VCREDIT has taken the road of building a stable digital and intelligent platform through actual combat and technical precipitation. In 2023, it will launch its core business system VOS, which greatly improves R&D efficiency. In addition, it has also launched "AI+" tools such as smart office and intelligent customer service. Its online Xuanyuan business system and Kunlun Mirror intelligent risk control system have been adopted by a number of external cooperative institutions, and continue to provide assistance for the digital transformation of financial institutions.

The development of industry technology drives enterprises to calmly respond to ESG risk management

The fintech industry is facing many challenges of ESG management risks and unbalanced industry development, and it needs to pay attention to the protection of personal rights and interests in a timely manner in the process of platform-based services, the protection of data and privacy security in the process of information integration and application, and the ethical issues of science and technology in the process of scientific and technological innovation. Fintech companies need to analyze specific issues and respond to ESG risk management in a timely and strategic manner. Taking AI applications to deal with ESG risks as an example, VCREDIT has provided a responsible ESG action model for the fintech industry by formulating the principle of "internal before external" (i.e., not directly facing customers in the short term, focusing on improving internal office efficiency and business operation capabilities) to avoid corresponding risks in a timely manner and steadily promote business development.

Looking ahead, with the gradual improvement of the application of ESG standards and the deepening of ESG management practices, the fintech industry can make use of its own development trends and business characteristics to actively tap into ESG knowledge and knowledge reserves, continuously improve its ESG performance, and contribute to the sustainable development and transformation of the financial industry.

[1] IFRS S1 stands for IFRS 1: General Requirements for Sustainability-related Financial Disclosures and facilitates entities to disclose information about sustainability risks and opportunities, and IFRS S2 stands for IFRS 2: Climate-related Disclosures, which encourages companies to disclose information about how entities manage the potential negative impacts of climate change.