ESG criteria are also gradually permeating the fintech sector, where being sustainable is a priority. This takes the form of Fintech for good, let’s see what it is.
The concept of "Fintech for good" is gaining momentum in the fintech scene. This is happening as regulators are trying to push companies to become ever more sustainable. At the same time, consumers are also becoming increasingly attentive to sustainability, especially the social one. It is for this reason that more and more companies in the fintech sector are paying attention to ESG (Environmental, Social, Governance) criteria.
According to EY, many companies are embracing these changes. Some, in fact, have decided to try to contribute, directly or indirectly, to achieving the sustainable development goals of the United Nations. These would be 5% at European level and 14% at global level.
Many realities have noticed the growing attention paid to sustainability. For example, according to a 2021 EY study, 90% of institutional investors pay attention to ESG criteria when investing. The marriage of sustainability and fintech therefore seems to have made the latter much more attractive than it was previously.
It is for this reason that some realities have decided to bet on the sector, investing in it. Over the past three years, venture capital funds have grown from investing $700 million in 2019 to approximately 3 billion in 2022.
Fintech for good: what it is
Within the concept of Fintech for good you can find services very different from each other. Some are summarized in the "Fintech Waves 2023" report and are:
- financial inclusion - banking: accessibility and impact of credit, financial education, accessibility to management tools for personal finance.
- Access to grants and donations - payments: donations, crowdfunding, pay for success.
- Accessibility to financial transactions through disintermediation - payments: disintermediation of financial actors to lower entry barriers, accessibility to cross-border payments.
- Impact finance - investments: equity crowdfunding, impact investments, reduction of the carbon footprint, security (green and social bonds).
- Reporting and impact management - TechFin: identify impact assessment methods, measure the impact of business activities, impact monitoring, reporting activity not relevant to the financial area.
- Access to private welfare services - Insurtech: micro-insurance, social insurance, loyalty program for good.
Fintech for good: the situation in Europe
According to what was reported in "Fintech Waves 2023", a report produced in collaboration by EY and the Fintech District, there are currently around 300 fintech startups in Europe engaged in the sustainability sector on various aspects. 198 of which founded after 2016. Of these:
- 218 are active in the environmental sector(45%);
- 169 focus on social aspects (35%);
- and 101 on those of governance (21%).
At the end of the third quarter of 2022, fintech companies operating in the ESG sector had raised a total of $641 million. In the same period, the funds raised were 292 million in 2020 and 844 million in 2021.
The Countries with the highest number of fintech startups operating in the ESG sector are:
- United Kingdom: 63
- Germany: 53
- France: 28
- Italy: 23
- Switzerland: 19
But in which sectors do these startups operate? According to the data collected by the Politecnico di Milano, 40% of companies operate in the lending sector, 15% in the RegTech sector, 14% in the payments sector and 12% in the insurtech one.
Original article published on Money.it Italy 2023-02-24 10:00:00. Original title: Fintech for good: cos’è e come genera sostenibilità
