Future of Philippine fintechs to be potentially driven by ESG investing

The future of Philippine fintechs, which have basic characteristics centered around innovation and sustainability, will be driven in major part by investments that value environmental, social and governance (ESG) principles, analysis from consumer finance company Digido revealed.

The global sustainability technology (SusTech) industry, characterized to have a key role in achieving ESG goals, has so far attracted about USD 400 billion in investments, with main growth occurring from 2014 to 2022, according to Tracxn. Of this USD 400 billion, about USD 8.8 billion has been used to finance the fintech microfinance sector, an integral part of sustainable development. At the same time, according to disclosed data, only USD 4 million was invested in 169 SusTech companies in the Philippines — indicative of opportunities to accrue more investments.

Possible measures for ESG-bent investments to become the mainstream driver of fintech development in the country include 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. 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 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% of those in Southeast Asia, coming in joint fourth place with Thailand, after Singapore, Indonesia, and Malaysia.^[1] The share of Philippine SusTech companies in SEA will maintain its pace for the foreseeable future, landing between 10 to 11%.

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

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[1] SusTech companies in the Philippines were identified based on the Tracxn global database of companies. Those included in the study were from sectors primarily related to the green agenda and sustainable development, including Green Funds, Sustainable E-commerce, AgriTech, Green Transport, Green Energy, Eco Manufacturing, Air, Water and Waste pollution management, Sustainable Finance, Circular Economy, Human Resources and Green Buildings segments.

A comparative analysis of such companies in Southeast Asia was carried out, taking into account the annual change since 2000: separately for Indonesia, Singapore, Malaysia, the Philippines, Thailand, Vietnam, Cambodia, Myanmar, Brunei and Laos.