Three fintechs that are driving sustainability
We looks at three fintechs driving sustainability via the UNs Environment Programme’s Finance Initiative (UNEP FI) Principles for Responsible Banking.
The United Nations Environment Programme’s Finance Initiative (UNEP FI) Principles for Responsible Banking outlines the ways in which banks can commit to creating products and services that benefit both individuals’ and society’s wider goal of making a positive impact on the planet.
Banks from all over the world join together in this initiative to commit to these six principles, which align with the UN’s Sustainable Development Goals (SDG’s), and the Paris Agreement.
The six principles for responsible banking are:
Alignment: The promise to align a company’s business strategy to be consistent while catering to both individual needs and societal goals, as set by the SDGs, the Paris Agreement and government goals.
Impact & target setting: Driving to promote change and positive impact while simultaneously working to reduce negative impacts.
Clients & customers: Banks will work closely with both clients and customers to encourage and enable sustainable practices, building positive foundations for future generations.
Stakeholders: companies will work closely with stakeholders in order to achieve these goals.
Governance & Culture: These commitments will be implemented through effective governance.
Transparency & Accountability: The success regarding the implementation of these principles will be shared with the utmost transparency.
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With these principles in mind, FinTech looks at three banks that have signed up to the (UNEP FI) and are leading the way in transforming the financial sector to a more sustainable industry.
ING has been a member of the UNEP FI since 2007. The financial services company serves over 75mn customers across Europe, the United States, Canada, Latin America, Asia and Australia. ING believes that economic growth and sustainability are “two sides of the same coin.” Given the nature of the company, paper is often a large point of impact for ING. It has worked to overcome this and, as a result, is the first major Dutch organisation to be 100% carbon neutral. The company now plans to procure 100% of renewable electricity by 2020 for all the buildings it operates.
In addition to this, ING applies strict social, ethical and environmental criteria on its financing and investment policies. All clients and transactions are screened against the Environmental and Social Risk (ESR) framework. ING emphasises that sustainability is in the fabric of every financial decision made; it was one of the first companies to commit to exit coal by declining work with companies in this industry.
BBVA joined the initiative in 1999. From its inception, the multinational financial services group has focused on people and taken society into consideration in its business strategy. The company has 88,000 employees, 35mn customers across 32 countries and focuses on building strong relationships with its customers in Spain, Europe and Mexico and other countries across the Americas.
BBVA created the Corporate Social Responsibility Department within the Chairman Office in November 2002, specialising in the commitment to social economical and environmental progress. In August 2019, Antoni Ballabriga, BBVA’s Global Head of Responsible Business, joined Jacki Johnson as the new Co-Chair of UNEP FI’s Global Steering Committee.
UNEP FI’s Head, Eric Usher said: “We are delighted that Antoni is to co-chair UNEP FI’s Global Steering Committee, the body which sets our overall strategy and work programme. Antoni and the team at BBVA have been very active members of UNEP FI, the UN’s largest partnership with the finance sector. Toni’s involvement with and enthusiasm for UNEP FI’s Principles for Responsible Banking has been a big part of the success of the new banking framework, and we are looking to work with him even more closely.”
Ecobank is the latest addition to the list of banks complying with the principles, joining on 13 November 2019. With a commitment to delivering excellent customer service, the bank was named ‘Best Retail Bank in Africa’ at the African Banker Awards in 2019.
Ade Ayeyemi, Group CEO of Ecobank said : “At Ecobank we take our sustainability responsibilities seriously by continuously ensuring that sustainable practices are established throughout our decision making, management, business activities and organisation. Along with our customer-centric focus and intent to be a trusted adviser, we take a proactive leadership role in sustainability and our decisions and actions always take account of society’s goals and Africa’s future generations. By subscribing to the six Principles for Responsible Banking we are publicly declaring that we follow the best-in-class sustainability practices that have been adopted by major global banks.”
The bank has demonstrated a consistent commitment to ensuring sustainability. Last year, all 33 of Ecobank’s locations across Africa planted trees in order to combat the approximately 5mn trees that are cut down every year globally. In April 2019, all sustainable resolutions were approved at the 31st Annual General Meetings, sharing with shareholders that the bank was set for long-term sustainable growth.
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FIVE things fintechs must do to keep investors onboard
New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.
Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?
The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.
Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.
Equal access to financial wellness education
Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.
The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.
Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.
For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.
Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.
The rise of AI-Powered Advice
Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?
Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs.
Focus on financial mental health
New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.
It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.
Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.
Gamification for good
The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.
Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.
Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.
The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.