ESG under Pressure: Challenges and Materiality Strategies in Fintech

Abstract

This study investigates the challenges FinTech companies face when implementing Environmental, Social, and Governance (ESG) frameworks under conditions of regulatory uncertainty, and the materiality-driven strategies they deploy to overcome them. The proliferation of ESG requirements across global jurisdictions has created a fragmented and fast-evolving compliance landscape, placing disproportionate pressure on FinTech firms whose rapid growth and leaner organizational structures limit compliance capacity. Despite growing ESG scholarship in finance, empirical research addressing FinTech-specific implementation challenges under regulatory uncertainty remains limited. Methodologically, the study adopts an interpretivist, inductive approach grounded in qualitative inquiry. Semi-structured interviews were conducted with senior ESG professionals across consulting, private equity, and corporate roles, selected through stratified purposive sampling to capture both internal implementers and external advisors. Data were analysed through iterative grounded theory coding, open, axial, and selective, allowing theory to emerge directly from participant experience. Findings reveal that regulatory uncertainty is the dominant barrier to ESG implementation, manifesting as shifting compliance requirements, resource misalignment, unclear board direction, and superficial tick-box behaviours. In response, high-performing FinTech firms adopt materiality-driven prioritization, concentrating ESG investment on issues of greatest financial and stakeholder relevance. Firms applying these strategies demonstrate stronger ESG integration and generate measurable business value beyond compliance, including improved capital access, talent retention, and competitive differentiation. These findings contribute to both theoretical and practical discourse on sustainable finance in FinTech, offering actionable guidance for practitioners navigating regulatory complexity and for policymakers seeking to reduce the cost of regulatory fragmentation on fast-growing firms. UDC: 005.591.6+005.35; JEL: G28; G32; M14