Fintech firms are transforming the financial industry by making services more accessible and affordable. Their rapid growth, particularly during the COVID-19 pandemic, has brought more attention to the importance of sustainability such as environmental, social, and governance (ESG) issues. As ESG becomes more important, there is likely to be more interest in fintech firms that focus on ESG aspects, like addressing climate change, reducing carbon emissions, and promoting a circular economy. The research by Sunway University’s Dr Ng Shir Li and colleagues has explored the impact of sustainability practices on the market performance of fintech firms during the COVID-19 pandemic. Specifically, the research aimed to determine whether fintech companies with strong environmental disclosures performed better in the market compared to their non-fintech counterparts during this period.  

The study builds on two main theories: the legitimacy theory, which highlights the importance of a social contract between fintech firms and their stakeholders, and the stakeholder theory, which emphasises the need for fintech firms to meet stakeholder expectations to ensure their survival and success. These theories suggest that fintech firms engaged in sustainable practices can improve their financial performance and enhance their market value. The research utilised data from 2011 to 2022, covering 48 fintech and 140 non-fintech firms. Ordinary least squares (OLS) and correlation analyses were employed to assess the relationship between environmental disclosures and market performance, comparing the pre-COVID period (2011-2019) with the COVID-19 period (2020-2021) to understand the differential impact.

There are three key contributions from this research. First, it reaffirmed that Fintech firms demonstrated significantly better environmental performance (78.4%) than non-fintech firms during the pandemic. This was evident from their higher compliance with environmental standards and more comprehensive sustainability disclosures. Second, it revealed that environmental disclosures were a critical factor in enhancing the market performance of fintech firms, accounting for 10.2% of their market success during the pandemic. This indicates that investors highly value transparency and sustainability, making these factors essential for the financial success of fintech firms. Lastly, it highlighted that shareholders and other stakeholders are particularly sensitive to sustainability disclosures. This suggests that fintech firms can leverage their commitment to environmental issues to attract investment and improve their market position.

The findings of this research are particularly relevant for investors, shareholders, policymakers, regulators, and start-up entrepreneurs. The increased focus on ESG criteria means that fintech firms with robust environmental practices are more attractive to investors, potentially leading to greater capital inflows and higher stock prices. Additionally, the results provide valuable insights for regulatory bodies aiming to promote sustainability in the financial sector. Encouraging fintech firms to prioritise ESG disclosures can enhance market stability and foster a more sustainable economy. For new and existing fintech companies, integrating strong sustainability practices can be a strategic advantage, differentiating them in a competitive market. This is especially relevant as consumer and investor preferences increasingly lean towards environmentally responsible businesses.

In conclusion, this study aligns closely with the United Nations Sustainable Development Goal (SDG) 9, which focuses on building resilient infrastructure, promoting inclusive and sustainable industrialisation, and fostering innovation. As ESG factors become more prominent in investment decisions, fintech firms with strong sustainable credentials are likely to experience continued growth and success. By leading in sustainability practices, fintech firms not only fulfil a moral imperative but also enhance their financial performance and competitiveness in the market. 

Dr Ng Shir Li
Sunway Business School
Email: @email