Exploring ESG in Fintech

The Finterview - Fintech Exposed episodes 12 & 13.

As sustainability and environmental, social, and governance (ESG) factors gain prominence in the Fintech industry, experts like Lorraine Mouat and Nick Hunt from Thistle Initiatives are at the forefront of understanding and navigating these developments.

Keep reading for the key takeaways from the episodes or 🎧 listen to the full podcasts here.

Thistle Initiatives is a regulatory compliance consultancy that helps businesses navigate the complex regulatory landscape by offering tailored solutions for businesses of all sizes. They guide companies through the process of bringing innovative ideas to market while ensuring compliance with the UK's Financial Conduct Authority (FCA) regulations. Nick and Lorraine have almost 40 years of experience between them, bringing the expertise needed to work in multiple industries to navigate the thorns of compliance.

The organic and non-organic move towards ESG

The financial services industry is witnessing an organic shift towards ESG, driven by a growing sense of social responsibility and increasing regulatory requirements. This is leading businesses to focus more on ESG factors to meet the expectations of shareholders, regulators, and customers.

The FCA's decisive actions on non-compliance, such as issuing strong warnings and imposing penalties, further emphasise the need for businesses to prioritise ESG considerations in their operations.

ESG has emerged as a significant global topic in financial markets, with an increasing focus on standardising environmental, social, and governance concepts across industries. This standardisation is crucial for facilitating comparisons and assessments of ESG performance among businesses.

The global wave of political energy supporting the ESG movement

The Paris Agreement, signed in 2015 by 196 countries, marked a turning point for global climate action. The legally binding agreement aims to achieve net-zero greenhouse gas emissions by 2050, signalling a strong commitment from nations worldwide to address climate change and drive sustainable development.

This global wave of political energy supporting the ESG movement has made it increasingly important for companies to adopt ESG strategies and prioritise sustainability. This shift in focus is essential for businesses that aim to thrive in the long term and maintain a competitive edge in the market.

Despite the growing prominence of ESG, economic challenges and the COVID-19 pandemic have led to mixed growth in ESG adoption. Some businesses have resisted decarbonization efforts due to economic constraints, while others have been forced to prioritise immediate survival over long-term sustainability goals. However, the overall momentum towards ESG remains strong, and businesses that embrace these principles are likely to be better positioned for future success.

The FCA Dear CEO letter and ESG’s role in Fintech

The FCA's recent "Dear CEO" letter highlights the importance of ESG factors in the Fintech industry and the need for businesses to prioritise these considerations. Fintech plays a vital role in advancing ESG by offering innovative solutions that can help reduce the environmental footprint of financial services.

However, concerns and debates are ongoing about balancing sustainability efforts with product innovation. Fintech companies must navigate this delicate balance to ensure that their offerings contribute to a more sustainable future without compromising their growth and competitiveness.

The FCA is committed to fostering a thriving and sustainable Fintech market by ensuring diversity in the industry and encouraging businesses to improve their product offerings. Balancing the costs of enhancing sustainability with the need for product innovation is a challenge that the FCA and Fintech companies must address together.

Fintech companies have inherent advantages in their ESG efforts, thanks to the digital nature of their services. By leveraging digital technology, Fintechs can eliminate waste, offer eco-friendly payment options, and develop loyalty programs that promote sustainable practices.

To expand their ESG impact, Fintech companies can focus on promoting financial inclusion and literacy initiatives, as well as extending their services to remote and inaccessible areas. By doing so, Fintechs can contribute to social and economic development, empowering individuals and communities while promoting sustainability.

The growing consumer interest in ESG and sustainable investments

As consumer interest in ESG and sustainable investments grows, there has been a surge in responsible investment funds. Consumers are increasingly seeking ESG information and making informed choices about where to invest their money, driving businesses to prioritise sustainability and ethical practices. This leads to opportunities for payment service providers.

Payment service providers can capitalise on the growing consumer demand for ESG-aligned services by offering innovative and sustainable solutions. Embracing ESG initiatives can serve as a competitive advantage, differentiating providers in the market and positioning them as leaders in the industry.

ESG initiatives are gaining momentum globally, with the UK and EU leading the charge in promoting sustainable practices and policies. The FCA's commitment to ESG reflects its dedication to fostering a sustainable financial services industry, further solidifying its role on the world stage.

Following Brexit, UK regulators are focused on maintaining and enhancing ESG standards to ensure competitiveness within Europe. This commitment demonstrates the UK's determination to remain at the forefront of sustainable finance and regulatory compliance.

The importance of governance in ESG: senior managers and board’s accountability

Governance plays a critical role in driving ESG initiatives and ensuring ethical business practices. The FCA's focus on governance, particularly within payment services and tech firms, highlights the need for strong oversight and accountability in promoting a sustainable financial services industry.

The FCA's Senior Managers Regime emphasises the importance of holding senior managers accountable for ESG implementation within their organisations. Boards should be prepared for increased scrutiny from the FCA in this area, as regulators look to ensure that ESG factors are fully integrated into business operations.

FCA’s focus on retail consumers and vulnerable customers

The FCA places particular emphasis on retail consumers and vulnerable customers, ensuring that they have access to appropriate financial services and products. By prioritising financial awareness and protecting vulnerable customers, the FCA promotes a more inclusive and responsible financial services industry.

The FCA prioritises consumer protection and ethical conduct in the financial services industry. Drawing on lessons from the 2007-2008 financial crisis, the FCA aims to prevent consumer harm and promote accountability, underscoring the importance of transparency and ethical business practices.

The introduction of the Consumer Duty in July reinforces the FCA's commitment to protecting retail customers. This new regulatory obligation aims to ensure that financial services providers prioritise their customers' best interests and take necessary steps to prevent consumer harm.
Corporate users of financial services face different regulatory expectations compared to retail consumers. The FCA has implemented protections for small businesses and financial services users, ensuring that their interests are safeguarded and that they have access to appropriate services.

FCA’s concerns about payment services firms

The FCA has expressed concerns about payment services firms, leading to increased scrutiny on previously authorised companies. As regulatory expectations rise, firms may face challenges in meeting these heightened standards, highlighting the need for robust compliance strategies and risk management practices.

Fintech companies must address the growing gap between banks and the regulator's expectations. Failure to do so could have potential consequences on consumer choice and market diversity, as firms struggle to maintain compliance while providing innovative and competitive services.

Another challenge in the ESG space is defining and measuring compliance. Clear specifications for ESG compliance are still in development, and the FCA is actively working on creating criteria for ESG labelling to help businesses and investors better understand and assess ESG performance.

To address regulatory challenges, Fintech companies can explore various solutions, such as absorbing regulatory capacity or leveraging banking-as-a-service (Baas) platforms. These approaches can help businesses navigate compliance challenges more effectively and maintain a competitive edge in the market.

To approach ESG compliance in Fintech, companies should start small and set realistic goals. Developing company-specific policies and measuring progress is essential, as is leveraging data to demonstrate compliance and track improvements.

Embracing ESG initiatives can significantly enhance a company's brand value, attracting customers, investors, and talent. Additionally, ESG efforts can boost staff motivation by fostering a sense of purpose and pride in the organisation, ultimately contributing to overall business growth.

The Elephant Carpaccio approach to compliance

The Elephant Carpaccio approach to compliance involves breaking down complex compliance challenges into smaller, more manageable tasks. By addressing each task individually, companies can make steady progress towards achieving their ESG and compliance goals, ensuring they don't become overwhelmed by the magnitude of the challenge.


Fintech companies must strike a balance between compliance and business growth to ensure a healthy competition within the industry. Leveraging technology can help businesses achieve regulatory compliance more efficiently and effectively, enabling them to focus on innovation and market expansion.

The rise of ESG and its growing importance within the Fintech sector underscores the need for companies to prioritise sustainability and ethical practices. By embracing ESG initiatives, businesses can enhance their brand value, attract talent, and contribute to a more sustainable and responsible financial services industry.

Listen here 🎧or in your favourite podcast app👇

All Podcasts