Environmental, Social and Governance (ESG) policies are treated with scepticism by some, but companies may be underestimating the profitable potential of adopting such measures.
According to the speakers on the ‘Up and down the risk curve – is how we value sports betting changing?’ panel at the Betting on Sports Europe (BOSE) event, consumers are placing increasing value of ESG – with an obvious impact to betting firms.
As argued by digitalRG’s Head of Sustainability, Laura Da Silva, finding money for investment in sports betting is not particularly difficult – the challenge lies in whether said funding is long-term or short-term, and today’s investors consider a wide range of factors.
She explained: “Are they going to be ready for regulations as well as culture? How do they portray women in the market? What talents do they hire? Problem gambling and responsible gambling, are they ahead or behind?
“If you are focused on making money in the long-term and are not thinking about your social and environmental responsibility you will have less opportunities or at least not as good responsibilities as others.”
Da Silva also offered some predictions on how operator-affiliate relationships could change moving forward, adding: “There will be more pressure from tech companies, more pressure from regulation.
“We’re seeing stricter measures on advertising and marketing – and some operators are starting to put pressure on affiliates with how they do business and the messages that they use.”
This was a view shared by Sten Andersen, ATG’s Chief of Innovation, who observed that although ‘affiliates are here to stay’, they may need to make changes to their business models.
“Stricter regulation and abolition of third party cookies will force them to change the way they operate,” he said.
On ESG, Andersen also maintained that the policies provide operators with a means to differentiate themselves from other businesses, whilst the measures also take on increasing importance due to regulatory reasons.
In Andersen’s view, if sustainability is ‘handled right’, it can contribute to profitability, whilst from an investment perspective stakeholders can gain confidence in knowing that a company is committed to meeting regulatory and compliance standards.
“Investors absolutely hate risks if they are not calculated risks – if you are going to invest in something and don’t know that a company will be able to fulfil regulatory demands, what do you do?
“This could start a demand for producing different kinds of standards to what we have today, different standards and measurements.”
One of the key issues with adopting sustainability policies, according to Da Silva, is the fact that profitability is often measured in the short term – whilst the positive impacts of an effective ESG strategy will likely not be noticed until a few years have passed.
Commenting on how ESG can be evaluated, she added: “I think you can see it in two ways. Number one is if you have a strong sustainability policy it reduces risk related to regulation abd, loss of talent, there’s a lot of things related to minimising risk.
“On the other side, if leaders are creative enough, it aligns with actual sustainability which can bring enormous opportunities. It can be by being able to launch new games that were not previously allowed.
“It can be by being the one that attracts the right talent that will make the difference. There’s many different ways so I think it’s about how you value reducing the risk of the value, increasing opportunity.”
Ultimately, in order to properly profit from ESG, companies must fully comprehend what the policies entail, Da Silva continued, pointing to firm’s such as Tesla as an example of this.
Da Silva noted that Elon Musk has been rather dismissive of ESG of late, asserting that despite Tesla’s positive environmental impact via its electric vehicle production lines it is ranked lower in ESG lists than some oil companies.
However, digitalRG’s Head of Sustainability put forward the point that it is on governance issues where Tesla is lacking, such as with regards to employee welfare and the supply chain.
With regards to the gambling sector, she continued: “Sustainability is two ways – if we don’t do anything about the environmental impact, if we don’t do anything about problem gambling, what impact will it have on your company?
“It’s also the other way around – what impact do you as a company have in society and contribute to making society or the environment better? ESG ratings are not perfect, far from it, but it’s really just within the company and the benefit to the company.”
Lastly, examining some different topics to the theme of ESG which was central to much of the panel, Waterhouse VC Founder Tom Waterhouse offered some comment on 888’s acquisition of William Hill and increasing interest in the crypto space.
“The largest and most profitable companies are now crypto operators – their ability to stay in the unrelegated environment is very profitable,” he said.
“You’re going to have the big large scale operators dominate the regulated market and you’re gonna have a large under the radar non-regulated operators that dominant the crypto market
“If you’re wanting to be in that area, and they see a huge price in terms of financial prize, but I see a very complicated business model. The largest crypto operator in the world that may not want to be the largest regulated operator in the world.”