Could Covid-19 pushing for more sustainability investments be good for RegTechs?
The pandemic has caused an upsurge in interest in renewables, which could potentially benefit RegTech ventures.
The global economy has been in freefall since the outbreak of the coronavirus pandemic. Businesses has shut down as countries across the globe deal with the fallout.
However, a recent J.P. Morgan study suggests that the crisis could kick off new interest in the environment and, subsequently, investment in environmental, social and governance (ESG) initiatives.
“Over the long run, Covid-19 could prove to be a major turning point for ESG investing, or strategies that consider a company’s environmental, social and governance performance alongside traditional financial metrics,” said Jean-Xavier Hecker and Hugo Dubourg, co-heads of ESG and sustainability within J.P. Morgan EMEA Equity Research.
And there’s reason to think that this renewed interest in renewables could benefit the RegTech industry.
“Despite its devastating effect across the globe, the Covid-19 crisis has been credited with reigniting our collective social conscience and with it, our interest in; environmental protection; fairness, diversity and inclusivity; good governance and long-term sustainability,” says Thomas Russell, Think Evolve Solve, the RegTech100 company.
“Most people are likely familiar with the term ESG, which has fuelled investment into funds and businesses that claim positive performance against a range of defined ESG factors on environmental impact, social contribution and robust oversight and due diligence.
“Whilst these factors remain somewhat poorly defined, the ESG movement has attracted the attention of regulators in multiple jurisdictions who are now seeking to develop greater regulatory infrastructure and to introduce compulsory reporting.
“We believe that further waves of the virus would heighten interest in ESG beyond even the current remarkable level, and as such would expedite the implementation of ESG regulations across the globe.
“This is positive news for RegTechs who have developed solutions for the gathering, sharing and reporting of ESG data. Indeed, it’s an area of our business where we are forecasting considerable growth across the next few years, working mainly with the small and mid-caps who frequently lack the resources to manage their ESG data efficiently.”
The RegTech industry has seemingly managed to beat expectations through the crisis. For instance, investment into the global RegTech sector increased by 5% in the first six months of 2020, compared to the same period last year, according to FinTech Global’s research. In total, the industry raised $3.9bn between January and June this year.
