The Role of Financial Technology in Enhancing ESG Performance through Reducing Financial Constraints

Authors

Farhan Alfredo Sekolah Tinggi Ilmu Ekonomi Widya Wiwaha, Yogyakarta

DOI:

https://doi.org/10.54518/fid.1.1.2023.1195

Keywords:

Environmental, Social, and Governance (ESG), Financial Constraints, Financial Technology (FinTech), Sustainability

Abstract

The rapid development of Financial Technology (FinTech) has significantly transformed modern financial systems and created new opportunities for firms to enhance sustainability practices. This study aims to examine the role of FinTech in improving Environmental, Social, and Governance (ESG) performance through the reduction of financial constraints faced by firms. The study employs a literature review approach by analyzing reputable scholarly articles indexed in Google Scholar published over the last five years. The analysis was conducted through the identification, classification, and synthesis of literature discussing the relationships among FinTech, financial constraints, and ESG performance. The findings indicate that FinTech enhances firms' access to financing, reduces information asymmetry, and improves the efficiency of financial services. These improvements contribute to the alleviation of financial constraints, enabling firms to allocate greater resources toward environmental, social, and governance initiatives. Furthermore, stronger ESG implementation is associated with higher firm value, improved investment efficiency, increased innovation, and long-term sustainability. The study concludes that the integration of FinTech and ESG represents an important strategic approach for creating sustainable value and strengthening corporate competitiveness in the digital economy era.

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Published

2023-06-30

How to Cite

Alfredo, F. (2023). The Role of Financial Technology in Enhancing ESG Performance through Reducing Financial Constraints. Finance Innovations Digest, 1(1), 63–73. https://doi.org/10.54518/fid.1.1.2023.1195