Opportunity for Increased Financial Inclusion
More and more countries, institutions and companies are starting to consider not only various profitability goals, but also how to be in line with climate commitments to have a better reputation across clients and customers and potentially contribute to improving the environment. Some of them have committed to contributing to the attainment of the - United Nations’ 2030 Agenda and Sustainable Development Goals (Figure 1) - while others are aligned to the objectives of the Paris Agreement.
Figure 1: 17 Sustainable Development Goals adopted by the United Nations General Assembly in 2015.
More and more countries, institutions and companies are starting to consider not only various profitability goals, but also how to be in line with climate commitments to have a better reputation across clients and customers and potentially contribute to improving the environment. Some of them have committed to contributing to the attainment of the - United Nations’ 2030 Agenda and Sustainable Development Goals (Figure 1) - while others are aligned to the objectives of the Paris Agreement.z
At the same time the ambitious “FinTech Action plan”, aimed at creating a harmonized and dynamic framework for FinTech, has been developed by the EU. The plan removes obstacles (including EU financial regulation) which have hindered the use of technologies in financial services, such as improving competition through cooperation and common standards of interoperability and data exchange. The term FinTech refers to innovative financial solutions, as well as insurance solutions (InsurTech) enabled by Information Technology (IT). The classification of all FinTech solutions can be described as follows: The application of IT in the financial services domain Startups that provide services for financial processes Services covering all relevant financial services processes ranging from payments, investments and financing Innovations in the insurance industry like digital brokers or peer-to-peer insurance.
Typical examples are crowdfunding platforms (capital-raising), virtual currencies and tokens (crypto-assets; especially in the payment and investment sectors) created through DLT structures, robo-advising (investment and insurance advice as well as portfolio management) and InsurTech (i.e. usage-based, on-demand or P2P insurance). The specific Action Plans are parts of the broader European Union Capital Market Union Projects, which stress the importance of focusing EU actions on both digital finance and sustainable finance tools that help to create and achieve a more efficient, affordable and sustainable society. That’s exactly where NGO efforts are aimed. Many NGOs already recognize the Action Plan towards FinTech and Sustainable initiatives as separate programs. However, there is a need to address sustainability by developing FinTech technologies in order to align them towards the climate situation, as well as to adopt the most efficient developments. For instance, FinTech technologies are not often associated with environmental goals (especially the high energy-consuming blockchain), which postpones the achievement of the Sustainable Development Goals. At the same time the Sustainable Development Goals have a long-term horizon and require significant funds. Only recently, the European Union appears to recognize the potential in using technologies developed in the FinTech area in the context of Sustainable Finance. However, certain steps, definitions and frameworks are needed by organizations wanting to go about fixing the long term problems of society. This is exactly the reason why NGOs can and should help FinTech companies to go green.