How does October implement ESG? Second article of our special series!
In the first article on ESG, we disclosed to you that this was the first article in a new special series of October’s blog. After sharing why ESG is a key strategic focus for October since 2021, in this second article we can move on to how we apply it on a daily basis for October itself and for our entire community.
So, let’s start with a little throwback before move a step forward!
As explained in the first blog post, in capital markets ESG is referring to a set of metrics used by investors to evaluate company behaviour and to determine the sustainability-related risks on the expected financial performance of the company (e.g. exposure of assets and operations to climate risks).
ESG, and consequently an ESG company plan focusing on practices and progress reporting, is related to a company’s risk management. And it requires decision-makers to analyze large amounts of specific data.
And what about October? Bearing all this in mind, how does October implement it?
In this second article of our series, we start from a more strategic perspective, deep diving into our core principles, our approach and our commitments.
Let’s continue to follow us in the next article to come down to brass tacks with our ESG Score!
Our core ESG principles
In developing our ESG framework, we are sticking by a few simple but fundamental principles.
Are you interested in learning more about them? Continue reading below!
- ESG standards that can apply easily to all the SMEs we work with, regardless of their sector, size and home country;
- ESG that is easy to communicate in a transparent and immediate way to both lenders and borrowers;
- ESG criteria that can be monitored as swiftly and regularly as the rest of our financial data;
- ESG criteria that can be easily measured and aggregated into reports that meet the demands of our institutional investors;
- A structured company-level ESG / CSR action plan, which is true to our nature as a pan-European FinTech, abiding by the latest European standards.
October applies ESG in two ways
We can think of Corporate & Social Responsibility (CSR) as the precursor of Environmental, Social and Governance (ESG). We define CSR as a list of initiatives companies can put in place so they can be socially accountable to themselves. And also to their shareholders and their clients.
Is ESG more than this? Yes! It makes those effort measurable.
Regarding ESG integration in our activity, October is active in two ways:
- In our commitment to our investors and external community, working on our own environmental, social and governance policies and our commitments to having a positive impact on our community
- In our credit policy and lending activity, with a systematic Exclusion Policy and ESG score embedded in the customer journey.
Let’s find out better!
Our ESG commitments within our community
October has been working on upscaling its ESG commitments for years.
In 2019, we were one of the first companies to sign the UNPRI (Principles for Responsible Investment). The UNPRI consist of six key principles that encourage investors worldwide to incorporate ESG issues in their practices, and incentivise peers in their industry to do the same.
Since then, we have published our Sustainable & Socially Responsible Lending Charter, an ESG Charter, and our three-year ESG/CSR plan for 2020-23, as well as upscaled the integration of ESG criteria in our credit policy (read below for more!).
As Sustainable and Socially Responsible Lender, October commits to actively promoting good ESG practices within its community of borrowers, investors and partners.
To this aim, October is a proud signatory of various initiatives and networks promoting environmental and social sustainability. Among the main ones:
- the Climate Act, a consortium of 200+ tech companies committed to measuring and reducing their carbon footprint. At October, we carried out and published our first Carbon Footprint Assessment in late 2021. Find out more here!
- the Planet Tech’Care initiative, which promotes the integration of digital technology into sustainability practices;
- the SISTA initiative, born to accelerate financing to women entrepreneurs, so to reduce gender inequality in the entrepreneurial world.
Our approach and tools as Sustainable and Socially Responsible Lender
Getting down to business on our lending activity, we adopt three approaches to comply with our commitments as Sustainable and Socially Responsible Lender:
- Our mission of economic and social impact on SMEs. We are responsible lenders, helping SMEs to thrive. Our activity of providing loans to SMEs reflects in a positive impact in terms of job creation and flourishing economic performance of the European ecosystem.
- Our credit restriction or exclusion policy. A list of sectors excluded a priori from October’s lending activity because of their negative environmental, social or ethical impact. These include, but are not limited to: illegal economic activities; tobacco; weapons and ammunition; fossil-fuel based activities; energy-intensive and high-CO2-emitting industries, etc.
- Our ESG score, systematically assessing the ESG performance of all companies who apply for an October loan. October has developed two subsequent generations of its ESG Score: the first in 2018 and the second in 2022.
And just the progressive increase of ESG integration in our lending activity has brought us to achieve a great milestone recently: the application of our enhanced second-generation ESG Score and of a new ESG reporting system in line with the latest regulation. It has enabled us to classify our new fund October SME V as an Article 8 Fund under SFDR – a fund officially “promoting ESG characteristics”!
This recognition is a fundamental sign of our serious commitment to ESG and a milestone in October’s journey towards a more sustainable activity.
In light of this, you are ready for the next article! Keep in touch to find out soon why an ESG score is important and then take a closer look at the October one.