ESG meets fintech: Q&A with Benjamin Soh, CEO 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 collects, records and maintains sustainability data for decarbonisation, as well as provides digital tools for effective ESG financing.

CrASIA spoke to Benjamin Soh, CEO of STACS, to find out how fintech can support the ESG agenda and help empower businesses in their decarbonisation 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 operates the Monetary Authority of Singapore’s (MAS) Greenprint ESG Register. It is a data aggregator that digitizes data from non-digital sources, multiple industry sources and globally verified sources.

Much of the sustainability data out there is fragmented and comes from different sources. They include traditional data such as information about electricity and power consumption, which may not be readily available.

So what we do is leverage technology to collect, digitize and organize this data. Through computer technology, we can make more meaningful use of such information.

Through ESGpedia, we can also offer other types of services. For example, we may perform investment portfolio tracking. When we collect data from companies, companies can be tracked in terms of their sustainability efforts. This is an aspect that will be particularly interesting for financial institutions because many of them are concerned with greening their portfolio.

The data also allows us to perform supplier tracking, especially for companies looking to green their supply chain. We are talking about companies that want to buy from suppliers that have achieved certain sustainability standards.

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

Kr: How comprehensive 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 companies.

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

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

That said, we have already completed live use cases across Asia. Our goal remains unchanged and this lead in Asia gives us momentum for growth.

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

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

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

BS: When data is freely available, anyone doing greenwashing is easily found out. But when data is opaque or not easily verifiable, it’s easy for a company to claim they’ve bought a certain amount of carbon credits and hit zero.

So the fundamental question we have to ask in our line of work is: What are the characteristics of the carbon credits that companies buy? 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 take into account in a company’s ESG journey. For example, not all carbon credits are equal. Some carbon credits are certified, while others are not. Then there are also carbon credits that are not certified according to the same standards. So it is important to keep 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 on purpose.

It’s because there’s too much at stake, and I think we need to put things in perspective. These are large institutions with large customers. What they really want to do is meet their ESG goals and post their commitments towards net zero. But they may 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 acquiring more data to know if they are on the right track. Sometimes they can end up mislabeling their activities if they aren’t green, simply because they don’t have access to all the data sources.

So I personally feel that greenwashing may not be intentional, especially banks, as they have a lot more to lose than to gain.

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

Kr: You mentioned earlier that data plays a central role in the transition towards the net-zero goal. How should data be managed among new technologies?

BS: In essence, disclosures must be of a higher quality.

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

Another is to ensure data availability on an ongoing basis and not through a one-off release. For example, there should be a monthly report conducted through a technology platform that allows investors to track such data through regular, automated alerts. 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 are trying to do now at STACS. When we collect such data, we want to ensure that certain tools are made available, such as portfolio monitoring tools or supplier tracking, whereby automated alerts are generated for users to inform them of issues such as a change in the business profile.

Kr: McKinsey recently published a report on the net-zero transition and economic and social adaptations it involves. According to the study, transitional disturbances are expected. What are your thoughts on overcoming these types of distractions?

BS: Better to do it sooner rather than later. If we start now, the cost of this transition will be gentle as opposed to doing it later when it will be much tougher.

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

Everyone should start the transition early so they can set incremental goals rather than enforcing a drastic change in behavior or purchase 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.

Especially where specific types of data are needed to scale the financing of certain infrastructure projects, such as clean infrastructure.

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

This is why it is important to start leveraging technology earlier, including data, to drive more capital into game-changing infrastructure. This will reduce the disruptions we will face during the net-zero transition.

Kr: Regarding the topic of financing, how should capital allocation be carried out to succeed with the sustainability push?

BS: There is definitely not enough funding for sustainability projects. But this is improving, which is clear, especially in the last one to two years. We have observed new partnerships in the ESG space between public and private finance, or mixed finance.

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

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