Weekly Dose of ESG — OnlyFans or NoFans?
OnlyFans or NoFans?
Friday, 27th August 2021
What is going on?
What an emotional rollercoaster for one of the UK’s biggest “creative platforms”! The community that aims to promote user-generated graphic posts made headlines earlier this week when announcing the ban of sexually explicit content from 1st October onwards. That doesn’t sound like breaking news at first, if it weren’t for the fact that the pandemic turned OnlyFans into one of the world’s fastest growing social networks — with over 615% YoY growth — driven mostly by, well, sexually explicit content…
To put things in perspective, OnlyFans has around 130 million users, two million contributors and many billions in revenue. The firm’s management estimated that the ban would lead to a potential revenue drop of more than 25% until year-end (ouch!). Competitor platform Fansly confirmed the exec’s suspicion and reported over 4,000 applications per hour after OnlyFans announced the ban. One firm’s loss, another firm’s gain….
One elaborate question remains: Why? In an effort to find an answer, we examine the drivers behind the ESG considerations in an industry that most often lands on an ESG fund’s default exclusion list.
What does it have to do with ESG?
OnlyFans CEO stated that the proposed ban came as a demand to “comply with the requests of our banking partners and pay-out providers” as they cited “reputational risk and subsequent refusal of business” — the group included major names such as JPMorgan Chase, Bank of New York Mellon and Metro Bank, but also merchants such as Visa and Mastercard that facilitate the on-site payments.
The likely reason for the banks and merchants cracking down on sites like OnlyFans is driven by an overall sustainability and ethical push. The chances are a prominent financial institution wouldn’t want to be associated with OnlyFans as a result of the explicit content on the site, leading the institutions to apply pressure on the firm to review their processes. What we saw was effectively a stakeholder activism and engagement 101.
In investments, adult entertainment is a pretty standard screening flag alongside the sin-stocks like alcohol, tobacco or weapons. This is where investors apply moral judgements, defining their no-go areas rather than following material ESG data. It is important to differentiate the two, one is a moral bias the other is data-driven framework. Interestingly, the S-Ray Adult Entertainment preference filter flags only 3 out of 27,000* listed companies — meaning only 0.01% of listed companies generate revenues by providing some sort of erotic content. This is hardly surprising, given the scrutiny public companies go through….
What is the message here?
The outrage that followed OnlyFans’ announcement caused the company to reverse its decision this Wednesday, but many questions remain for users and creators alike. Such as, is the ban coming back at some point later?
While controversy around OnlyFans’ business model might be warranted (it really is highly problematic), the recent events are a sign of hope that such platforms will take more robust approach to enforcing their user guidelines and will be held accountable for protecting their communities.
Until the next week!
Paula & Nicolas
*Source: Arabesque S-Ray, as of 25th August 2021
