Fintechs Driving Sustainability: A Global Impact
A report produced in collaboration by McKinsey & Company, Elevandi, and the Monetary Authority of Singapore draws on information discussed during the ESG track of the latest Singapore Fintech Festival.
Sustainability has become a major concern for people worldwide, and the financial technology (fintech) sector is no exception. The fintech industry could play a big part in promoting sustainability by helping move the economy toward one that is better for the environment. During the Singapore Fintech Festival 2022 (SFF 2022), it was stressed how important it is to put sustainability first because it is one of the most important problems the world is facing right now.
"Net zero is a massive mountain to climb, and reaching the critical sustainability goal will test society’s capability and commitment. The McKinsey Global Institute has provided a steep estimate—that $275 trillion in capital spending between 2026 and 2050 would be needed," Pat Patel, Executive Director of Elevandi, said, commenting on the launch of the report.
Some of the key highlights of the report include:
The move to a net zero global economy by 2050 will require the greatest reallocation of capital since World War II, coupled with a massive influx of financial innovation.
Data remains crucial in supporting the innovation of fintech: Data collection and analysis are crucial factors in whether fintech innovation can successfully support sustainability goals. Data is necessary to make informed decisions, evaluate market participants, and assess initiatives' success – or failures –. Yet good data remains a scarce commodity.
Fintechs are already playing a role in driving the sustainability agenda. "Fintechs for Good," i.e., fintechs that embed an ESG agenda into their core product portfolio, operations, and mission, attracted $2.1 billion in funding in 2021, and this trend is expected to continue. As sustainability efforts proliferate, a key challenge for all companies would be to demonstrate real impact and self-protect against greenwashing.
Encouraged at least in part by increased concern for climate change, regulators worldwide are taking a keen interest in sustainability claims by corporations, particularly their reporting activities.
"Drawing on research done by McKinsey and the proceedings of the ESG track of SFF 2022, this report provides insights into how fintech has the potential to help us reach a sustainable future," Joydeep Sengupta, Senior Partner, McKinsey & Company, said.
"In the first half of 2023, we will continue to bring policymakers and regulators together with corporates, startups, and investors to progress frameworks and concrete initiatives. We'll be convening key global leaders in Rwanda to focus on inclusive and sustainable fintech projects and Switzerland to focus on technology and data frameworks required to move the sustainability agenda forward," Patel added.
The "SFF 2022 Insights: Enlisting FinTech To Help Create a Sustainable Future" report is just one of the seven reports being released by Elevandi in partnership with consultant partners. The other areas cover a wide range of topics that are relevant and important to the fintech industry.
For example, the topic of Web3 and digital assets should provide information about how the fintech sector can use the technology behind cryptocurrencies and other digital assets to drive innovation and growth. The topic of banking for businesses is expected to explore how fintechs can help businesses access the financial services they need to grow and succeed.
The topic of finding a balance between innovation and regulation is likely to talk about the fine line between encouraging innovation and ensuring that fintechs work safely and securely. The report on the future of fintech in growth markets should show what opportunities and challenges fintech companies face as they try to expand into new markets.
Lastly, the topic of how fintech can become more resilient to volatile market conditions is likely to give valuable insights into how the fintech sector can better prepare for and deal with uncertainty and volatility.
Overall, these areas are expected to give the fintech industry useful information and advice to help it grow and develop further.
Click here to access the full report