Since being removed from the Financial Action Task Force (FATF) grey list, Malta has rapidly addressed several shortcomings in its broader purview. The demand for better management has flowed down to the Malta Gaming Authority (MGA), which has implemented enhanced safer gambling measures and more robust anti-money laundering and counter-terrorist financing (AML/CTF) protocols in 2022 and 2023.

As part of its renewed focus on actionable activities, the MGA announced their decision to explore “the development of a voluntary ESG Code of Good Practice” for all its online gambling licensees.

 What Does an ESG Code Comprise?

Our first question is, what does an ESG code of conduct cover? And then, is it unique to the online gambling sector?

Investopedia defines the term ESG as follows:

1. Environmental criteria consider how a company safeguards the environment, including corporate policies addressing climate change.
2. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates.
3. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

Furthermore, having businesses that benefit from being licensed in a country contribute to its betterment is a common practice worldwide. However, most companies that operate in a country meet these requirements by abiding by local laws regarding corporate structure, taxation, employment equity, carbon emissions, and more.

The Carrot or the Stick?

There is, however, some concern that the tone adopted by the MGA in announcing this drive and its current implementation is disingenuous. While they claim to praise the everyday activities of their licensees, they have launched a “voluntary ESG reporting platform” where operators can have their current ESG performance judged.

While this is fine from a fact-finding perspective, the MGA announcement also noted that the resultant gradings would help them with “driving investment towards sustainable businesses”, which has a distinctly punitive undertone.

Within the next twelve months, this voluntary activity report will underpin the upcoming ESG legislation, with the MGA clarifying that:

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“Starting from 2024, all large or listed companies will be required to report under the Corporate Sustainability Reporting Directive (CSRD).”

They state that adherence to the CSRD will be the only way to unlock the “benefits of running a sustainably conscious operation”. What is yet to be clarified is whether the MGA will be content to offer incentives to promote their drive or if they will resort to fines and other restrictive measures to enforce ESG compliance from operators who do not meet their yet unclear expectations.