Paytech covers any technological innovation that changes the way we pay. Having already looked into ESG finance we now turn our attention to the impact the fintech industry is having on ethical finance.
As The Fintech Times turns its attention towards ethical finance and the different ways in which fintechs are driving it, we once again reached out to a number of experts to get their take on the space.
‘Taking the lead in ethical finance’
First, Jeremy Baber, CEO of payment card provider Lanistar, explains how fintechs are driving ethical finance: “Fintechs are taking the lead in ethical finance and driving the environmental agenda through new technology and self-service applications – this makes the process easier for consumers while removing unnecessary environmental options.
“For example, statements. Big banks have largely moved to digital, but much of their correspondence is still paper and fintechs in general are all paperless. But we still need to do more to remove plastic usage, for lenders offer reduced interest rates on green investments or home improvements.”
‘Giving investors the tools they need to align their holdings with their values’
Kevin McGuinn, senior product manager at CMC Invest, also shared his views: “Fintechs can help make a case for ESG investing by giving investors the tools they need to align their holdings with their values.
“One example might be showing investors the product area involvements of stocks they are considering investing in. This allows people to make a more informed decision about whether a company shares their principles or not.
“Without being too self-promotional, we’re really proud of our ESG preferences feature on the CMC Invest app. Investors can set filters for business area involvements that they want to avoid. They’re then alerted when a stock they view doesn’t match the preferences they’ve set.
“People may be happy to invest in companies that produce alcoholic beverages, but not one that carries out animal testing. They could be fine backing nuclear energy but not thermal coal. Access to more information puts the power into investors’ hands and allows them to set their own ethical finance standards. That means the lack of universal ESG standards may be less of a hurdle when it comes to people making investments that match their values and their own definitions of what’s sustainable.”
‘Time is indeed running out’
Here, Monika Liikamaa, co-founder and co-CEO of payment processing solution provider Enfuce, shines a spotlight on some of the fintech platforms doing their bit to drive ethical finance: “We see fintech companies driving ethical finance through a plethora of different innovative approaches and initiatives.
“For instance, platforms like goHenry and Welcome Place are addressing financial empowerment, particularly among younger generations and underprivileged communities, promoting financial literacy and inclusion.
“Similarly, we have fintechs such as Lune and Deedster playing a crucial role in raising awareness about climate impact and sustainability. They’re not just raising awareness but also providing tangible solutions to mitigate the environmental impact through tools and services that help individuals and businesses understand their carbon footprint, modify their behaviour, reduce emissions, and adopt more eco-friendly practices.
“We’re also seeing regulators stepping in by tightening requirements and oversight, aiming to curb fraudulent activities and create more transparency and trust within the financial sector. Then, of course, we as Enfuce are actively enabling change through various initiatives, leveraging technology and innovative financial solutions.
“These collective efforts of these fintechs and regulatory bodies bring hope for a more ethical financial landscape. However, the sense of urgency is paramount, considering the pressing challenges facing our world. Time is indeed running out, especially in the context of environmental crises and social challenges, and the need for more collaborative, innovative, and swift action remains critical to ensure a sustainable and ethical financial future.”
Without the support of fintech, ESG integration ‘would remain a pipe dream’
Matthieu Maurin, CEO and co-founder of Iceberg Data Lab, also shares some significant contributors to the space from his own experience.
“Fintechs are enablers of ESG integration into capital allocation decisions, contributing to the cost of integration for financial institutions and improving the quality of the service to end-users.
“There are several services provided along the value chain, like portfolio management of analytics solutions providers, we may name here for instance Weefin or Greenscope which are providing analytics solutions and support to financial institutions willing to leverage on their client’s ESG data lake to bring turnkey piloting system or reporting solutions.
“More upstream along the value chain are the providers of data, scores or ratings, which feed IT systems with the data points coming from issuers’ report but structured to ensure quality, comprehensiveness and comparability of the data.
“These data points allow fund managers for instance to select activities that they do not want to finance or invest in (weapons, adult entertainment, coal-fired power plants, etc.), to select corporates which, because they operate or deliver more sustainable products or services, will thrive. Without the support of fintech, ESG integration and the development of sustainable funds or bonds would remain a pipe dream.
“Results of such integration can clearly be seen in investment products available on the market, such as the Axa ACT Biodiversity (thematic fund focused on Biodiversity impact) fed by Iceberg Data Lab (IDL) dataset. The TNFD pilot report published by the consulting firm I Care shows another example of integration for two banks (BNPP and Credit Agricale) and two asset managers (SCOR and Mirova) leveraging on IDL Data Solutions to test their exposure to biodiversity risk and opportunities with two different angles and risk appetites.