Forum Follow-Ups – UN Sustainable Development Goals

Given the colossal threat climate change poses, the conversations on ESG can sometimes overly focus on the ‘E’ and the ‘S’ gets sidelined. FinTech’s innovation can open up financial services to those previously overlooked and create more financial inclusion, leading to better financial security. It is crucial to think about marginalised groups who are financially excluded and cannot access finance in ways that others can. This includes looking at those who are underbanked, as well as unbanked. 9 million people in the UK have their financial needs overlooked. For organisations, it is about designing more inclusive FinTech by embedding inclusivity into the framework and putting those with lived experiences into the design process. This includes making processes simple and accessible, and ensuring that implementing certain tools to help one group does not negatively impact another. FinTech disrupts traditional banking and financial services; in rebuilding, it is crucial to include those who were previously left out. 

Consumers are powerful drivers of change. When asked, 84% of individuals say that the environment is an important factor in their consumption but only 50% actually buy from eco brands. There is a gap between sustainable and ethical preferences and actual spending. By providing data and information, FinTechs can give consumers tools to make informed and educated spending decisions to make an impact. This affects both day-to-day spending but also investment decisions. In addition to helping consumers identify which behaviours to change, companies must also lead by example and measure their own emissions, focusing particularly on scope 3 across entire supply chains. Focusing on responsible production will lead to responsible consumption as consumers have more sustainable options to choose from and can see more clearly how their spending is impacting. 

One of the most prevalent themes throughout the day was the importance of data and how well FinTech is placed to collect, measure and share information. Almost every session discussed how critical data is in measuring impact, giving accountability and modifying behaviours. It is crucial that policymakers, businesses and consumers all have access to the right data so that they can see the impact each decision makes. FinTech has huge capacity in computing and connectivity to create change by filling data gaps. Data is critical for sustainable finance. As a concept, data can seem quite abstract, but in fact is a continuous flow of information. We need to know what is material and how to create material impact by codifying information down to asset level performance and risk profiles to modify behaviours of money flow. Collaboration is also key. Data collection is necessary but it needs to be shared – we must also share the meta-data about the data we hold. 

Most discussions on climate change focus on transitioning to net zero and removing carbon from the atmosphere. However, this is not the only aspect of climate change. Biodiversity needs to be discussed in tandem with carbon. Natural resources are being depleted and we must think about the effects of this on supply chains and businesses too. Natural resources haven’t had prices on them before and financial markets work best when things are priced correctly. The Taskforce on Nature-related Financial Disclosures (TNFD) follows frameworks from the Task Force on Climate-related Financial Disclosures (TCFD) to demonstrate how crucial it is to measure impact on the natural world and how natural capital can be used. This affects investment funds and pensions. Like with climate, there is an exciting investment opportunity to support new innovative methods in clothing manufacturing, agriculture and organic fishing that support the natural world. Nature and biodiversity are complex, their interaction with finance is ever more so. 

Another key theme from the day was collaboration. Collaboration between the public and the private sector, between businesses and between consumers. The climate crisis is not something that a single government, company or individual can combat alone – global cooperation is needed to reach sustainable and innovative solutions. Sharing information is crucial – this includes access to data, ESG disclosure reporting and sharing best practices. The forum saw many calls for open finance to follow open banking and how regulation will need to lead this. Sessions explored how both regulation and private capital are crucial pieces to solving climate change but that neither alone is sufficient and collaboration between the public and private sectors is crucial. Similarly, businesses and consumers must listen to one another: businesses can help consumers understand the impact of their decisions, and consumers can help show businesses what their sustainable and ethical preferences are and how demand is changing.