Fintech and sustainable development: The innovation race has started
BSD presented a new study at the 7th Impact Forum in Zurich, where the theme this year was “Sustainability and Digitalization”. The study highlights the disconnect between mainstream finance, financial technologies (fintech) and sustainable finance. It challenges Swiss financial institutions and fintech start-ups to collaborate with a new sense of purpose, building sustainable development goals into their new value propositions. This is what a younger generation of Millennial and Generation Z investors expect.
The report “Green Digital Finance: Potential in Switzerland and Beyond” was co-authored by BSD Consulting and the Sustainable Digital Finance Alliance for the UN Inquiry into a Sustainable Financial System, with support of the Swiss Government. Launched in October, it is part of emerging research done for the OECD, UN Environment and World Bank on sustainable finance and the contribution of digital finance.
The study highlights findings from international ratings of leading urban centres world-wide that consider themselves as fintech innovation hubs. Zurich and Geneva are well positioned in a leaders group that includes Silicon Valley, New York, Chicago, Toronto, Singapore, Hong Kong, Tokyo, London, Frankfurt, Dublin, Stockholm, Amsterdam, Paris and Sydney. While Switzerland’s level of investment in fintech is lagging behind other leading countries, Swiss fintech start-ups are improving their venture capital (VC) raising to levels approaching that of biotech and medtech. Switzerland’s leadership in cryptocurrency creates unique opportunities to establish itself as a global “green crypto-financial centre”, building on the experience of Zug (Crypto Valley) and Chiasso (Cryptopolis) as internationally recognized DLT centres.
While Switzerland is recognized for its role in establishing microfinance and impact investment, its fintech start-ups need to be challenged to take on the environmental and climate agenda in offering analytical services to the mainstream investment sector. Established Swiss financial institutions are recognised for their work in risk management and insurance, including the related aspects of climate change, and the country has a powerful position in transborder wealth management. Yet its fintech start-up community is still slow in taking on a green and sustainable development agenda. The study highlights some pioneer fintechs that are the exception to the rule. A challenge highlighted is to connect the sustainability-themed products offered by established Swiss financial institutions with the digital finance solutions offered by fintech start-ups. As the Swiss banking sector seeks to expand its international reach, it has a window of opportunity in taking green products and services to scale on the back of digital technologies.
The study explores opportunities related to various fintechs, including big data, artificial intelligence, blockchain, web-based and mobile platforms, as well as internet of things. These present diverse opportunities and new business models that display circular economy and sharing approaches in both developed and developing market context. With their young populations, emerging markets in particular present opportunities at economies-of-scale. “Our research highlights work by established entrepreneurs such as RepRisk as well as new fintech startups such as Carbon Delta and Celcius Pro who are gaining international recognition. It also recognizes the role of an enabling ecosystem, including fintech hubs such as F10 in Zurich and Fusion in Geneva and recognized Swiss technical universities in developing the local talent pool,” said Cornis van der Lugt, lead author from BSD Consulting at the Impact Forum in a panel discussion involving Bank Frick, Basel University and the Swiss Government (BAFU).
BSD Managing Director Peter Teuscher said: “We look forward to working with the Sustainable Digital Finance Alliance, Swiss Sustainable Finance and other local partners in further exploring the role of fintech for sustainable development. This is also supported by our international involvement in the Blockchain for Social Impact Coalition.”
The Table below presents an interpretation of key findings from the mapping within the Swiss context. It highlights recognized strengths of Switzerland and lead areas in terms of technologies, financial market subsectors and key environment-related themes addressed by Swiss players.
The report is available online at: http://unepinquiry.org/publication/green-digital-finance-mapping-in-switzerland-and-beyond/