• Gambling companies like Aristocrat and Light & Wonder are prioritising ESG and sustainability
  • The gaming sector’s adoption of ESG has influenced super funds to invest in gambling stocks
  • So should ethical investors follow suit?

 

More gambling companies, traditionally viewed as “sin stocks” and antithetical to ESG principles, now view leadership in sustainability and ESG as integral to their group strategy and a reflection of their core company values.

For instance, Aristocrat Leisure (ASX:ALL), one of the world’s largest gambling companies, hosted its inaugural ‘ESG Day’ for institutional investors late last year.

The company said it wants to promote responsible gameplay, or RG, as its most important sustainability priority.

“Playing responsibly means staying in control, knowing your limits and being able to stop at anytime,” Aristocrat said.

At the core, responsible gaming ensures that gambling remains a fun and safe activity, especially crucial in the online world where players aren’t face-to-face with operators.

Gaming companies can play a vital role in this by implementing various safeguards.

These include setting time and deposit limits, offering self-exclusion options, and enabling exclusion requests from concerned loved ones.

Such measures not only fulfil corporate social responsibility, but also safeguard long-term business interests, as they help retain a positive reputation and loyal customers.

Aristocrat’s CEO, Trevor Croker, says he shares the community’s legitimate concerns about the impacts of excessive gameplay on individuals and families, along with a desire to see the industry stamp out all illegal activity.

“As such, we have continued to invest in RG, in cooperation with customers, regulators, industry partners and others who share our vision of a vibrant and sustainable gaming and hospitality industry,” Croker said.

In 2023, Aristocrat collaborated with its major customer, the NSW government, and regulators to conduct Australia’s first-ever trial of cashless EGM (electronic gaming machines) technology.

The trial examined the adoption and effectiveness of new and sophisticated RG tools, which enable players to monitor and set limits on their time and spend.

“Results were encouraging and insights gained are being applied to an expanded Government-supported trial, which is set to get underway in NSW later this year,” said Croker.

 

Light & Wonder gets serious too

Light & Wonder (ASX:LNW), a direct competitor to Aristocrat, has also made sustainability its major focus and recently developed a 5-year ESG roadmap.

LNW is a leading global games company that spans slot machines, i-gaming, sports betting and lottery products.

As part of the roadmap, the company plans to launch a centralised ESG data management platform to enhance tracking and target-setting based on its ESG initiatives.

In 2023, the company deployed the Close Encounter Near-Miss Reporting System, which helps its creators and players quickly report hazards that could lead to an injury or accident.

The company is also monitoring the waste and recycling tonnage in its three major manufacturing facilities located in Las Vegas Sydney, and Manchester.

“All Light & Wonder gaming machines are made with recycled or recyclable materials, “ said the company.

“We have reduced the quantity of machine components and transitioned (where possible) to off-the-shelf parts, making it easier for us to refurbish decommissioned machines or salvage parts.”

 

Why gaming companies are taking ESG to heart

One key reason that the gaming sector is embracing ESG is that it’s a quick win.

The sector already has the basis of ESG by virtue of its highly regulated environment, making it logical for the industry to embrace these standards.

Although the sector may need to improve its environmental efforts, taking proactive steps can meet growing public expectations on ESG, which are increasingly shaping how the public views the industry.

“Implementing responsible gambling measures is essential and a legal requirement for any regulated online gambling company,” said a report from legal firm, GTG.

“… Gambling companies can engage in social impact initiatives to improve public perception. This may involve supporting and funding initiatives related to mental health, addiction treatment, or education programs on responsible gambling.

“Sport betting companies can, for example, actively assist in fight against match fixing by funding educational programmes at youth sport level on the importance of integrity in sport,” said GTG.

 

Should ethical investors buy gambling stocks?

In the past, the answer to that question has typically been a flat out “NO,” especially among many ESG fund managers.

Gambling stocks have long been linked to financial risks and societal concerns like alcohol-related violence and money laundering in casinos.

However, with the adoption of ESG practices in the industry, there’s a shift happening as major super funds begin investing in these stocks.

A recent paper by the AGR (Alliance for Gambling Reform) titled “Australian Superannuation Fund Investments in Gambling” revealed that the ten biggest industry super funds hold at least one major gambling shareholding in their portfolio.

AustralianSuper, for example, holds the largest amount of gambling-related stocks compared to other similar funds, totalling approximately $2.7 billion in its default investment option. This option is where members’ savings are automatically invested unless they actively select different investment strategies.

So, back to the question: can gambling stocks be included in an ethical investor’s portfolio?

“Although it may seem very innocuous compared to people dying of cancer from smoking, or being shot in a blood diamond conflict, if you think about it, it can play a really big harmful role and destroy lives,” said Robert Lewenson at Old Mutual Investment.

“Is there really a need for it in society? Is it merely entertainment or are people’s livelihoods at risk? I’d say it lends itself more to the latter.”

 

Gambling stocks on the ASX

Wordpress Table Plugin

Read MoreGaming

Featured Companies

You might be interested in