Everyday we read articles about ESG, attend speeches or panel discussions on this topic, or scroll through social media posts… but ESG is more than a trendy buzzword!
To find out the importance of ESG and understand why ESG is important to October, we are launching a new dedicated series on our blog.
Starting from what ESG is and why it is important to October in this first post, in the next one we’ll move on how October implemented it. And the series will continue: in the next episodes, you will dive deep into the ESG rules in our risk analysis or what ESG actions borrowers can implement and more.
Are you curious? Let’s start together!
Follow our #facts to get supporting evidences and read our #quotes to inspire your reading.
What does ESG mean?
➡️ The acronym ESG stands for Environmental, Social and Governance.
ESG refers to the set of corporate practices aiming to integrate environmental, social and governance sustainability criteria in company operations, the impact of these practices on company and community and the progress made in that regard.
Ok, a definition was mandatory in our article and it could sound not so easy… but it’s can sound even easier than that!
Why? On a daily basis most of the companies already manage ESG issues.
Let’s keep it simple as it is:
- in the Environmental category, for example, some companies have started to take greenhouse gas emissions or waste management into account;
- in the Social category, we can see more and more companies paying attention to customer and employee relations, job creation and protection, diversity and inclusion;
- finally, transparency or good reporting practices applied by most companies are essential to a good Governance.
Nothing new at all, isn’t it?
What’s new is the urgency with which companies now address such issues and how they approach them proactively.
The strategic plans of most companies already include effectively measuring ESG criteria and reporting on progress. These companies do not consider ESG only a framework to report on.
They consider ESG an increasingly relevant matter for the European market.
OK, now we all have in mind that ESG is not just a buzzword and we understood that it concerns matters that we manage and care about on a daily basis… because we believe in it.
So, why does ESG matter to October and why does October care about ESG?
💡 Fact #1: ESG is in our DNA, since our dawn
How beautiful the sun is when it rises fresh, like an explosion throwing us hello! Charles Baudelaire
ESG is the subject of increased awareness, and it is reshaping how people live and invest. The spirit and commitments of a responsible investor strongly mark the beginning of our history and our DNA. As a European Fintech with a mission to finance businesses better, we support in the fastest and simplest manner the sustainable growth of thousands of SMEs and the creation of dozen of thousands of jobs.
💡 Fact #2: Fact #2: ESG in our lending process and our company policies, since our day one
Opportunities are like sunrises. If you wait too long, you miss them.
William Arthur Ward
Backing our borrowers to obtain a positive socioeconomic impact on the surrounding community – as well as on the whole European real economy – already constitutes in itself our vision and a decisively socially responsible goal.
More than that, the growing momentum of ESG awareness that we are witnessing on the market corresponds to day-one commitments for October.
Let’s see these three cornerstones!
First, we embedded the analysis of ESG metrics in our credit policy and lending process since the start of our activity. We strongly believe since our born that our borrower assessment risk cannot solely rely on traditional financial metrics.
And second, we decided to become one of the first lending platforms to fully commit to the UN PRI (Principles for Responsible Investment), being a “Sustainable and Socially Responsible Lender” as far back as the 2019 pre-COVID era.
In parallel to these important global commitments, we also wanted our ESG responsibility to be concretely present in our everyday activities.
That is why we decided to start being responsible in our environmental impact starting “at home”.
Upscaling our ESG engagements and measuring our own ESG impact with our carbon footprint.
See below if you want to get a real feel for our actions and the care we take on it.
Our carbon footprint and our own plan
💡 Fact #3: Our three-year ESG/CSR plan, since 2020
As we have seen in the previous article related to our carbon footprint, the objective following our carbon footprint assessment is to take action in order to limit our carbon emissions.
We focus on simple but impactful actions we can be proud of and each employee can really love, ranging from signing all our contracts electronically to opting for the use of renewable energy, from making it easy to recycle at the office to adopting a flexible remote policy (…and for some roles we recruit on full remote) or promoting bike use.
Indeed, we want to have a positive impact not only on our investors and borrowers but on all our surrounding communities. And this will also contribute to our company growth.
This also means that we care strongly about enlarging our team with people who share our principles and our commitment to this mission.
Is October’s approach also yours? Join the October team now!
Then, besides October itself, let’s consider in more depth all actors involved.
Let’s go with our borrowers!
What importance does ESG have for our borrowers?
💡 Fact #4: ESG positive impact on our sustainable companies
“You cannot get through a single day without having an impact on the world around you. What you do make a difference, and you have to decide what kind of difference you want to make”. Jane Goodall
With a community representing more than 90 million jobs, small and medium-size businesses are the heart of the European economy. Our lending activity to SMEs reflects into a positive impact in terms of job creation and economic performance of the European ecosystem.
ESG facilitates top-line growth in the long run, attracts talents, reduces costs and drives values by building trust among consumers. This is why our borrowers are sensitive to ESG issues, too.
And this is why we hope to support the growth of more sustainable companies.
How? We approach ESG in an easy and user-friendly way for our borrowers.
October’s ESG score
💡 Fact #5: October’s ESG score
“Great things in business are never done by one person; they’re done by a team of people”. Steve Jobs
October adopts a unique and tailored approach to ESG. And we produce our own ESG score focused on small and very small businesses.
We leverage a mixed data pool: what does it include?
- data from relevant public institutions,
- private ESG databases from internationally recognised providers,
- and data extracted directly from borrower documents through October’s proprietary technology.
This combination enables us to build an ESG score that is as company-specific as possible, and credible and reliable for external market players.
The score is included in the global risk assessment of the company to be presented to their investment committee and to their investors and it will determine the pricing.
Let’s follow this series: in upcoming articles you’ll find out more about our ESG score and some clear examples of the strengths of our technological tools.
And what about our borrowers?
Through our survey results, you’ll also discover shortly where our borrowers stand on ESG issues. And discover also many inspiring stories of our most sustainable borrowers!
However, did you know that at October we have already put them in the spotlight and shared their stories for a long time?
Check out the story of Behring, which allows to get rid of plastic bottles by installing water purifiers directly at the tap!
Okay, and now let’s go to another actor involved.
What importance does ESG have for our institutional investors?
💡 Fact #6: our alignment to ESG market trends and to attention by institutional investors.
“Act as if what you do makes a difference. It does”. William James
European institutional investors are paying more and more attention to sustainability.
This is attributable to two forces.
For sure, the need to be aligned with the new European regulations on sustainable finance and environmental transition.
And certainly, also the exigency to respond to their stakeholders and community, who are now holding companies more accountable on their ESG impact.
On which terms?
- On their environmental impact, which requires transparency on carbon emissions and climate impact, a clear commitment to their reduction, and transparency on money allocation protecting investments.
- And finally, in terms of Social benefit, having a positive impact on their surrounding community by creating jobs, participating in social initiatives and contributing to community development. All linked to the principle of “giving back”.
At October, we are ready to align to these new market trends. Because they are perfectly in line with the level of ESG integration we already apply in our lending activity!
Then, let’s focus on our retail lenders.
What importance does ESG have for our community of retail lenders?
💡 Fact #7: ESG as value for our community of retail lenders.
“Making money is art and working is art and good business is the best art”. Andy Warhol
Our community of 40,000+ individual lenders is sensitive to sustainability and values responsible investments they know will have a real impact.
Today, the October borrower community provides jobs to more than 26,000 people in Europe. By investing via October, our lenders know that they are supporting the real economy, job creation and job protection.
Now that we’ve stressed the importance of ESG to October, our borrowers, our investors and lenders community, let’s see how ESG is becoming a requirement enshrined in international laws.
A closer look at the regulatory environment for sustainable finance
ESG integration is an increasingly crucial requirement, with several new regulations being issued recently on the European scene.
Let’s discover the key ones in a bit more detail at this link below!
Are you interested in going deeper into the current regulation and what it prescribes?
Read also these three Info Sheets below!
Regulation Info Sheets
|The SFDR lays out standardized obligations for financial market participants and financial advisors to:
|The European Taxonomy is a classification system built to identify what companies or economic activities can be considered as environmentally sustainable.
Through 6 key environmental objectives, it defines a list of industries and criteria that measure an economic activity’s contribution:
|The European Commission Delegated Regulation on SFDR Regulatory Technical Standards
|The European Commission Delegated Regulation on SFDR Regulatory Technical Standards is the one who finally set out the concrete reporting templates and quantitative thresholds.
The Regulation specifies the content and presentation of the information to be disclosed in the documentation in order to ensure the compliance with SFDR and Taxonomy.
The information will cover notably:
Now you know why October really cares about ESG and you are ready to find out how October implements it.
Stay tuned: the next article is coming very soon!