ESG meets fintech: Q&A with Benjamin Soh, managing director of STACS

ESG meets fintech: Q&A with Benjamin Soh, managing director of STACS

Founded in 2019, Singapore-headquartered startup STACS leverages its proprietary technology to develop environmental, social, and governance (ESG) fintech solutions.

In May 2022, the ESG-focused fintech startup officially launched ESGpedia, a data platform that aggregates, records, and maintains sustainability data for decarbonization, as well as provides digital tools for effective ESG financing.

KrASIA spoke to Benjamin Soh, managing director at STACS, to find out how fintech can support the ESG agenda and help empower businesses in their decarbonization journey.

This interview has been consolidated and edited for brevity and clarity.

KrASIA (Kr): Share with us about your proprietary financial technology, ESGpedia.

Benjamin Soh (BS): ESGpedia powers the Monetary Authority of Singapore’s (MAS) Greenprint ESG Registry. It is a data aggregator that digitizes data from non-digital sources, multiple industry sources, and globally verified sources.

A lot of sustainability data out there is fragmented and comes from diverse sources. They include traditional data such as electricity and power consumption information, which may not be readily accessible.

So what we do is leverage technology to aggregate, digitize, and organize that data. Through data engineering, we can make more meaningful use of such information.

Through ESGpedia, we can also provide other kinds of services. For example, we can carry out investment portfolio tracking. As we aggregate data from companies, firms can be tracked in terms of their sustainability efforts. This is an aspect that will be of particular interest to financial institutions because many of them are keen to green their portfolio.

The data also allows us to carry out supplier tracking, especially for companies looking to green their supply chain. We’re talking about companies keen to purchase from vendors which have achieved certain sustainability standards.

The ESGpedia registry also allows us to facilitate high-quality carbon offsets.

Photo courtesy of STACS.

Kr: How extensive is ESGpedia? 

BS: We have more than 60,000 companies and 90,000 assets covered in this database. Users of our platform include global financial institutions and corporations.

Kr: ESGpedia has aspirations to become a global database. But its efficacy is largely dependent on its scope and size. How much progress has been made on the database since launch? 

BS: The overall objective to be a global platform requires us to have access to a lot of data. So the effectiveness of the database may be limited by our range and scope.

Having said that, we have already completed live use cases across Asia. Our objective remains unchanged, and this head start in Asia provides us with the momentum for growth.

Kr: Tell us about a major challenge you face in the ESG space. 

BS: One is the lack of data, especially the primary data of assets that belong to companies. Most ESG data available today is fragmented and only focuses on publicly listed company data.

Kr: What about greenwashing in the carbon market? How challenging is that?  

BS: When data is freely available, anyone who carries greenwashing gets found out quite easily. But when data is opaque or not easily verifiable, it’s easy for a company to claim that they’ve purchased a certain amount of carbon credits and hit net-zero.

So the fundamental question we need to ask in our line of work is: What are the attributes of the carbon credits that companies are purchasing? Only when you get hold of this information can you assess how truly green the company is.

At the same time, there are other factors to consider in a company’s ESG journey. For example, not all carbon credits are the same. Some carbon credits are certified, while others are not. Then there are also carbon credits which are not certified by the same standards. So it’s important to bear these in mind.

Kr: Financial institutions have often been accused of greenwashing. And a number of your clients and partners include global banks and asset managers. Do you see any conflict there?

BS:  Some of them may have been accused of greenwashing but I don’t think any of them do it intentionally.

That’s because there’s too much at stake, and I think we need to see things in perspective. These are big institutions with large clients. What they really want to do is to hit their ESG targets and lay out their commitments towards net-zero. But they might struggle with the lack of data.

I want to give them the benefit of the doubt. I see them working hard in our partnerships and procuring more data to know if they are on the right track. Sometimes they might end up labeling their activities wrongly if they’re not green, simply because they do not have access to all the data sources.

So I personally feel that greenwashing might not be intentional, particularly banks, as they have much more to lose than gain.

In fact, many of them are already on the transition path to net-zero because of banking regulations. They don’t make more money when they are no longer able to finance the oil and gas industries.

Kr: You mentioned earlier that data plays a pivotal role in the transition toward the net-zero goal. How should data be managed amid emerging technologies?

BS: Essentially, disclosures need to be of higher quality.

For this to happen, one way is to ensure that all data is backed by technology whenever possible to ensure transparency and verification.

Another is to ensure data availability on an ongoing basis and not through a one-time disclosure. For instance, there should be a monthly report carried out through a technology platform that allows investors to track such data through regular, automated notifications. Without technology, you won’t be able to do this and scale it manually.

Kr: So when can we expect such technology to be available? 

BS: That is exactly what we’re trying to do now at STACS. When aggregating such data, we want to ensure that certain tools are made available such as portfolio or supplier tracking monitoring tools, whereby automated notifications are generated for users to inform them of issues such as whether there is a change in the company profile.

Kr: McKinsey recently released a report on the net-zero transition and the economic and societal adjustments that entail. According to the study, transition disruptions are expected. What are your thoughts on overcoming these kinds of disruptions?

BS: It’s better to do it sooner than later. If we start now, the cost of this transition will be gentle as opposed to doing it later when it’ll be a lot tougher.

For example, carbon tax. It may be only SGD 5 in 2024 but by 2030, it’s expected to be a much higher figure, so it is going to be a lot more costly.

Everybody should start the transition early so they can set incremental targets rather than enforce a drastic change in behavior or buying decision later.

Kr: What do you think is a key component to making such a successful transition?

BS: I think technological scaling is important to facilitate a successful transition. Data is a key component of this.

Particularly where specific kinds of data are needed to scale the financing of certain infrastructure projects, for example, clean infrastructure.

These are sustainability projects that require specific ESG data on the performance of their assets in order to quantify their benefits.

This is why it is essential to start leveraging technology sooner, including data, to drive more capital to game-changing infrastructure. This will reduce the disruptions that we’ll face during the net-zero transition.

Kr: On the topic of financing, how should capital allocation be carried out to successfully facilitate the sustainability push?

BS: There is definitely not enough financing for sustainability projects. But this is improving, which is evident, especially over the past one to two years. We have been observing new partnerships in the ESG space between public and private financing, or blended finance.

For example, there is also the Panther Green fund, put together by Singapore state-owned investment firm Temasek Holdings and HSBC. The fund will be investing in projects with longer ROI, such as hydrogen energy projects.

These projects are the ones that private investors typically have little patience for. I believe such financing can be a significant way to scale up decarbonization.

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