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SOCIAL RESPONSIBILITY
HOW SUSTAINABILITY PLUS CAN UNLOCK NEW VALUE IN GAMING
Sustainability reporting is unavoidable for corporations , but there is little evidence of it having a positive impact on the gambling industry just yet . How then can gaming leverage ESG to increase company valuations and lower cost of capital , ask Robert Montgomery and Steven Myers , co-founders of FiNTEL Sustain
ROBERT MONTGOMERY
is CEO of investment and advisory firms First Maximilian Associates and Axel Industries . He focuses on the gaming , technology , media , & entertainment , business services , sustainability and investment industries .
STEVEN MYERS has more than 20 years ’ experience in the gambling industry and works in igaming and land-based environments for both public and private sector clients . He is senior adviser on gambling for DRD Partnership and co-founder of Gaming Knowledge Centers .
E nvironmental , social , and corporate governance standards ( ESG ) have become an unlikely culture war topic . From public boycotts over brands ’ support for LGBTQ + rights to politicians claiming corporations ’ focus on ESG comes at the expense of shareholder returns , it ’ s suddenly positioned as a contentious focus .
A 2023 paper from Northeastern University ’ s D ’ Amore-McKim School of Business suggests the case against is somewhat overcooked : for every 10 % increase in emphasis on material ESG concerns , company value increased by 1.4 %, according to the research .
It ’ s more valuable to consider ESG factors in broader terms , however . In our view these form part of a category we call ‘ Sustainability Plus ’.
‘ Sustainability ’ factors are typical measures of environmental , social and governance that form a given company ’ s compliance profile . The ‘ Plus ’ part is the measures which factor in key financial performance and operational factors which are specific to an industry . In this case , that ’ s regulated gaming .
Companies that are delivering strong results within this overall package of performance measures are wellmanaged businesses that are executing well . In so doing , long-term value is inherently generated as long as it is recognised as such by investors .
HOW ESG CAN BROADEN THE INVESTMENT POOL
After all , the holy grail for companies is to be acceptable to the broadest selection of investment allocators as possible from both an equity and a debt perspective . Gambling is not on the acceptable list for some investors no matter what the metrics .
However , for those investors that do allocate capital to regulated gaming having the best performing metrics is critical . It can mean the difference between receiving an equity allocation or not and can make a huge difference in terms of cost of capital for debt . Hundreds of millions are at stake .
Put simply , regulated gaming companies that do not pay attention to sustainability factors are less likely to deliver value for investors .
By adopting Sustainability Plus principles , companies incentivise and
66 • ISSUE 136 • iGB L ! VE 2024