ESG investing to propel Philippine fintech growth

CEBU, Philippines — The growth of the Philippines  fintech (financial technology) sector is seen to be propelled by investments that prioritize environmental, social, and governance (ESG) principles, a study revealed.

According to an analysis from consumer finance company Digido, the future of Philippine fintech has basic characteristics centered around innovation and sustainability.

The global sustainability technology (SusTech) industry, characterized to have a key role in achieving ESG goals, has so far attracted about US$400 billion in investments, with the main growth occurring from 2014 to 2022. Of this US$400 billion, about US$8.8 billion has been used to finance the fintech microfinance sector, an integral part of sustainable development.

Meanwhile, based on disclosed data, only US$4 million has been invested in 169 SusTech companies in the Philippines. This suggests untapped potential for increased investments in the sector.

Possible measures for ESG-bent investments to become the mainstream driver of fintech development in the country includes the development of recommendations for integrating ESG indicators into the investment decision-making process and increasing investor literacy and awareness regarding ESG investing, for example, through information campaigns and corporate training.

Digido views these measures to further promote sustainable and responsible investment practices in the Philippines, thereby multiplying investments through funding rounds, saying companies that integrate ESG into their operations can expect more support from investors and consumers.

Moreover, they can play an important and tangible role in the sustainable development of the economy and the fight against climate change, as they expand their influence beyond business interests.

Growth of Philippines sustainability technology segment holding steady with Southeast Asian (SEA) peers.

The growth of the Philippines SusTech segment is expected to hold steady with its peers in Southeast Asia.

Digido observes that the 216 SusTech companies in the Philippines (as of 2022) account for 10.1 percent of those in Southeast Asia, coming in joint fourth place with Thailand, after Singapore, Indonesia, and Malaysia.

The share of Philippine SusTech companies in SEA will maintain its pace for the foreseeable future, landing between 10 to 11 percent.

Comparing regional dynamics with global trends, SusTech companies in Southeast Asia are anticipated to grow at a faster pace.