Investment in the Future: The Main ESG Gambling Standards

Experts of the Rosloto studio will tell you about the environmental, social, and corporate principles of the iGaming area. You will learn why the ESG influence in the industry is becoming stronger every year and how to adapt the casino business to these requirements.

About the ESG Standards

The term stands for “Environment, Social, Governance”. It is a set of rules established for these areas.

Today, these principles are used by companies from various sectors of the economy, from construction and biotechnology to tourism and gambling.

The popularity of ESG is growing rapidly:

• According to Bloomberg, by the end of 2022, the assets of enterprises following these principles exceeded $41 trillion. Experts believe that by 2025, this indicator will reach $50 trillion.
• More than half of all ESG initiatives are concentrated in Europe. The second place belongs to the United States and the Asia-Pacific region.

The concept of ESG was introduced in 2004 by Kofi Annan, UN Secretary-General. The principles were formulated as a response to the quick deterioration of the environment. Over time, the scope of their application has expanded to corporate governance and social relations within companies.

Shortly after, Kofi Annan turned to the CEOs of the world's leading organisations (Google, Amazon, General Electric, and others) with a proposal to include ESG algorithms in their business strategies. The appeal was called Who Cares Wins.

The concept proved to be very successful. Today, the annual profit of brands that adhere to ESG standards is increasing by an average of 12% annually. Such enterprises are becoming more and more attractive to investors.

Why the Gambling Niche is Focused on ESG Principles

The rules of environmental, social, and corporate responsibility are more and more associated with gambling.

In June 2023, Stephen Myers, a founder of the Praxis consulting company, and Robert Montgomery, an investor from First Maximilian Associates, published a joint work — ESG Fintel. It is dedicated to the impact of standards on the casino industry.

According to experts, at the beginning of 2023, the market capitalisation of the 40 largest iGaming firms reached $271.91 billion. Only those enterprises whose shares are listed on international stock exchanges were taken into account.

A slight improvement in the ESG reputation of the world’s leading providers will increase their total income by 2% or $5.44 billion equivalent.

Besides, companies will be able to:

• get loans at reduced interest rates;
• correctly allocate capital;
• increase business liquidity, and much more.

Let us consider why ESG is used in the gambling industry.

Attraction of Investment

Ratings of this concept exist in all developed countries. This is a critical indicator for private investors, venture and pension funds, as well as non-governmental organisations.

The most well-known ESG ratings are:

• Sustainalytics,
• MSCI;
• ISS ESG;
• RobecoSAM;
• S&P Global Ratings;
• ESG Evaluation;
• RAEX Europe.

Grants from the budget, loans at reduced interest rates, joint gambling startups — all this is possible thanks to a competent ESG policy. KPIs (Key Performance Indicators) of companies are growing stably, and operators make a good profit.

Robert Montgomery noted:

One of the main problems of the casino industry is that it does not have sufficient funding. The introduction of ESG will expand the pool of investors in the iGaming sector and play a key role in the attraction of cheap capital.

Implementation of the PR Strategy

The introduction of ESG can be an excellent newsbreak, and those entrepreneurs who ignore such standards can suffer a PR crisis.

In 2023, the most famous iGaming brands are following the principles of sustainability and actively talking about it.

Among the main communication tools, we can name:

• press releases on official websites;
• articles published on specialised resources;
• joint conferences, and other activities that create a positive information field.

In July 2023, Seventh Wave Corporate Training, an organisation that offers training in the field of ecology, social protection, and management, launched the “ESG Principles in iGaming” course together with the Casino Guru Academy online publication. It received rave reviews from operators and B2B providers and also became a good newsbreak.

Risk Reduction

The implementation of ESG is a guarantee of high-quality risk management in an enterprise and minimisation of costs caused by inefficient administration.

One of the key components of the strategy is the use of AML and FATF policies. They are aimed at combating money laundering and the financing of terrorism. The gambling industry faces these problems more than other sectors of the economy.

In the last year alone, the UK Gambling Commission (UKGC) has been paid more than $40 million in fines. Most violations are related to AML/FATF, so the introduction of ESG principles reduces the risks of sanctions to zero.

Development of the Employer’s Brand

The social component of ESG has a positive effect on the position of gambling services providers in the labour market. The better conditions the employer offers, the more interesting it is for job seekers.

Large GameDev developers (Betsoft, Microgaming, and Playtech) build huge offices with conference rooms, recreation areas, and gyms. This is how they form a good image of their companies.

Establishing a Positive Reputation

Adherence to ESG principles indicates that entrepreneurs care about the future of the country in which they operate. With such brands, it is possible to build reliable partnerships and not to lose money or reduce KPIs.

Ecological Standards

This aspect concerns how a business minimises its impact on the environment.

ESG initiatives can be related to:

• use of renewable energy sources;
• transition to waste-wise products and ecological packaging thanks to biodegradable materials;
• reduction of carbon dioxide emissions;
• minimisation of the waste amount and the creation of recycling programs.

ESG Agenda in the Gambling Field

At first glance, it may seem that the iGaming sphere has little to do with environmental issues but this is not entirely true.

Casino companies are large energy consumers, which means that they cause an increased amount of carbon dioxide emissions. The main sources of pollution are data and software development centres, as well as IT hubs.

According to the BBC, online entertainment is responsible for 3.7% of all global greenhouse gas emissions (by comparison, the aviation industry produces 4.8% of CO2).

Mike Hazas, a researcher at Lancaster University (United Kingdom), stated:

By 2030, the amount of CO2 emissions associated with games will increase by 30%. The main reasons for the changes are the active use of streaming devices, gadgets, and cloud storage.

Environmental Protection Initiatives by iGaming Brands

Let us consider how the casino niche implements ESG practices:

Social Standards

This aspect is focused on how gambling affects society in general and workplace culture in particular.

Examples of the main business practices:

• protection of confidential data;
• provision of training and support for the health, safety, and well-being of employees;
• promotion of equality via the implementation of gender policies and inclusiveness;
• investment in community projects, such as funding educational initiatives or youth sports;
• implementation of measures for combating bullying and harassment;
• audit of business partners for compliance with international ISO standards, and much more.

According to a study by the McKinsey & Company consulting firm:

1. Women are less likely to hold leadership positions in the gambling sector. At the same time, more than 50% of graduates in specialised disciplines (management, programming, and GameDev design) are women.
2. Leadership teams that were formed based on gender equity work more effectively. The profit of their iGaming projects is 25% higher compared to startups created only by men.
3. Gambling companies from the UK have the highest international representation. Their ethnic and cultural diversity is one of the indicators of income growth, the starting point for a more comfortable business scaling.

How the best providers follow social standards:

1. Greentube. The company organises training and internships for personnel and participates in international ESG projects.
2. 888 Holdings. The ESG committee has been working in the corporation for many years. Its priority tasks are the creation of inclusive jobs, support for local communities, and the search for talent.
3. Playtech. The brand supports its employees with training and development programs. In the first half of 2022, more than 4,000 people who work in the company completed author’s courses. The main topics covered were leadership, management, mental health, cybersecurity, diversity, and inclusion.
4. Pragmatic Play. The developer of games and casino platforms has become a sponsor of many social initiatives. The firm has funded the construction of the Inspire Rehabilitation Centre, Students 2Space courses, Hope and Homes for Children's work in Romania, and other community projects.

Corporate Principles

Management standards are focused on decision-making and reporting processes, as well as effective interaction with key persons.

The main components of a correct corporate policy in an iGaming company are:

• political independence;
• support for the rights of shareholders;
• avoidance of conflicts of interest;
• compliance with the principles of business ethics;
• publication of financial statements;
• timely payment of taxes and fees;
• effective risk management, and much more.

The Kindred Group provider is one of the industry leaders in the implementation of corporate ESG principles. The company was the first in the market to publish information on the income received from unfavourable gambling operations. The software vendor is aimed at achieving the 0 figure in the column of this indicator.

The UK, one of the most attractive casino markets, plans to introduce new sustainability disclosure requirements. This proposal was made by the FCA — the Financial Conduct Authority of the United Kingdom.

The new rules will require companies to publish full disclosure of key individuals and sources of funds. The changes will come into force no earlier than January 1, 2024, and will apply to all sectors of the economy, including gambling.

The goal of such updates is to make the UK a European centre for sustainable investment.

ESG and Industry Regulation

Environmental, social, and corporate responsibilities are integral attributes of licensed operators and B2B providers.

ESG principles are used by European and American jurisdictions, as well as offshore zones, which previously paid almost no attention to the sources of funds origin.

Experience of the Leading Gambling Commissions

The Maltese regulator (MGA) is the most respected one in relation to the implementation of ESG practices.

The Corporate Sustainability Reporting Directive (CSRD) will come into force in 2024. From now on, all licensees on the island are required to report on ESG performance.

Carl Brinkat, executive director of MGA, said:

More organisations have already started implementing the ESG strategy. The main objectives of such innovations are to achieve a carbon-neutral economy by 2050 and increase the level of social and corporate awareness.

Among the initiatives of the Ontario Lottery and Gaming Corporation (OLG), we can name:

• establishment of an internal committee to support gender, ethnic, and racial equality;
• funding for the LBGBTQ2S+ community for partially disabled persons;
• organisation of the United Way volunteer movement.

Support for Responsible Gambling Principles

The creation of fair, transparent, and safe gameplay is a priority for any online casino. This is also a key requirement of regulators, without which operators will not be able to obtain a licence.

The following ESG standards are complied with:

1. Use of certified hardware and software. The focus of specialised laboratories is the work of the built-in random number generator, the fairness of bonuses, jackpot mechanisms, and much more. Independent verification is carried out by QUINEL, GLI, BMM TestLab, and other agencies.
2. Implementation of responsible gambling mechanisms. These are reality check notifications, clock displays, automatic spin management, in-game caps, and self-restriction tools. Similar practices were implemented in software from Playtech, Amusnet, Endorphina, and other brands.
3. Safe advertising. Companies are required to provide only truthful information about their products and services. Marketing should never be aimed at socially vulnerable persons.

The Entain European provider is an example of the competent implementation of the principles of responsible gambling. The enterprise offers financial support to the British GamCare organisation, cooperates with the NCPG (American Council on Gambling), and sponsors the EPIC Risk Management Committee.

The Main Things about ESG Principles in the Casino Niche

Environmental, social, and corporate responsibility is considered the landmark for the iGaming industry in 2023.

• The benefits of introducing ESG standards include the attraction of large investments, implementation of a correct PR strategy, and reduction of operational risks. Enterprises can develop the employer’s brand and create a positive image.
• Environmental initiatives are related to the reduction of energy consumption and CO2 emissions into the atmosphere. It is possible to minimise harm by building modern IT hubs and secure data centres thanks to the use of cloud storage.
• Social standards are aimed at achieving equality and equity among employees of iGaming companies, creating safe jobs, and searching for talent.
• A key objective of corporate ESG initiatives is the disclosure of information about officials and sources of funding. They are also focused on combating money laundering and terrorism financing, as well as on supporting responsible gambling principles.

The Rosloto studio creates modern and secure iGaming solutions. We take into account all requirements of the industry’s regulators and offer only profitable projects.

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For all questions, please contact our managers.