ESG is the number 1, 2 and 3 priority for financial institutions (FIs). We’re not saying that, they are! Everyone understands that financial flows need to be aligned with sustainability goals. It sounds much easier than it is. It’s a massive transition that impacts all areas. So, what’s a good place to start?
Many companies - not just FIs - start by creating an ESG policy. Often, a holistic approach is taken. We, however, like to explore a much more focused approach. And we have some good reasons for it!
A holistic ESG (Environmental, Social, and Governance) approach considers all aspects of a company's operations and how they impact the environment, society, and governance. It takes a broad view of the FI’s impact on these areas and considers how they interrelate. This approach is certainly valid and often chosen by companies that are intrinsically motivated, for example like Triodos.
A focused ESG approach, on the other hand, concentrates on specific ESG issues that are deemed most material to the company. This approach is more targeted and concentrates on the ESG areas that are most relevant to the company's operations and stakeholders.
Unique competitive positioning
A focused ESG approach enables a unique competitive positioning. Many FIs struggle with having a clear differentiation from the competition. Championing a specific ESG angle brings new positioning opportunities.
Take inspiration from Tony Chocolonely. Their mission is to make 100% slavefree the norm in chocolate. That’s not just marketing speak - Tony goes all the way. It even is reflected in the product. Tony’s chocolate bars have uneven pieces, reflecting the unfair revenue distribution in the chocolate industry.
ESG Policy Mix Panel
- Impact-based pricing. In lending, pricing is based on risk. Fyndoo's pricing component goes one step further: it also uses the ESG policy model to determine the price of a loan. That way, a pricing incentive is created for loans that match the policy.
- Impact driven origination. Your ESG policy drives origination. It determines if something is a red flag or an area where you want to create impact. Fyndoo's acceptance framework contains an impact area that is parameterized by the ESG policy model.
- Comprehensive API. The mix panel exposes a comprehensive API so that the policy model can be used across the organization, not just Fyndoo!