The effect of sustainability practices on the financial performance of fintech companies

Nowadays, the relationship between business sustainability and financial performance can also be explained by evaluating it through non-financial metrics such as Environmental, Social, and Governance (ESG) criteria, which are considered non-financial data. Businesses can use sustainability indicators to offer business models that ensure transparency regarding sustainability to their stakeholders and themselves. Conversely, investors can acess the necessary financial and non-financial data and information for their investment decisions from sustainability reports, which influences their investment decisions. For investors, ESG criteria have provided a space for long-term planning and risk mitigation for returns. The relationship between the financial performance and ESG performance of FinTechs presents mixed results in the literature and no consensus has been reached. Due to the newness of the field and the challenge in obtaining data, there are only a few studies, indicating a gap in the research. The primary aim of this study is to examine how the ESG performance, referred to as sustainability indicators, affect the financial performance of Financial Technology companies. By doing so, highlighting the relationship between sustainability and financial success during a period of rapid growth for FinTechs provides valuable insights for stakeholders such as businesses, policymakers and academics. The study consist of 17 FinTech companies from countries including Avustralia, Brazil, China, England, Sweden, the United States, Neterlands and France with available ESG data from 2018 to 2024. The analysis includes eight models where accounting-based return on assets (ROA) and market based Tobin's Q ratios (TQ) are used as financial indicators, and combined ESG score, as well as individual E, S and G scores are used as sustainability indicators. The analysis was conducted by using a robust estimator Panel Corrected Standard Errors. In the analysis findings, the ESG combined score and the social score have a positive impact on both ROA and TQ. While the G score has a positive impact on TQ, its effect on ROA is not statistically significant.