Geilan Malet-Bates, P27 Green FinTech Forum Chair & Sustainable Finance Lead, discusses risks and opportunities for fintechs that want to accelerate the transition to a greener economy. This forms part of the longer, original two-part article published for Remotefulness
For some fintechs, sustainability is a natural part of their ethos. Their founders are quite savvy and are driven by a coherent notion of how to contribute to a sustainable world. For others, this is not the case – some simply because of a lack of interest (running after financial ROI only). There are also others who would like to be more conscious in their business operations. But need help understanding how they can take advantage of the opportunities for green fintechs and do good.
From an overall perspective and judging from the many start-ups I have come across, the majority are thinking about their offering from an impact perspective – i.e. which SDGs are they qualified to be focusing on meaningfully. There are always first-order impacts and second-order (synergetic) effects on others. Hence, we need to be transparent and clear to define measurable KPIs with regard to what one is trying to primarily achieve.
The advice I give start-ups is to start small. Bearing in mind that especially at an early stage, there is a fine line between the company’s survival – getting it running off the ground with limited resources – and trying to incorporate sustainable products. It is important to think ahead about future projects. But it is not always possible to do everything at once, so just take one steady step at a time. (Some investors do enquire about future projects.)
The funding (partnership) issue
If we look at sustainability beyond the aspect of being operatively greener, funding access remains an issue for many. I see limitations in how VCs qualify start-ups, perhaps not fully understanding the concept of sustainability themselves. And failing to offer the required guidance and support. Likewise, I see limitations in how start-ups qualify investors and business partners too. I tell start-ups often that they are not at anyone’s mercy.
Investments and business partnerships are no different to marriage. And so taking the time and doing due diligence on prospective investors is critical. Not all that shines greenly is green. A lot of people want to jump on board what they perceive as ‘hype’ or the latest trend. They are not following through very well on setting their businesses up for success.
Key sustainability trends, risks and opportunities for green fintechs
The main concern to me is the way we are transitioning to a greener economic infrastructure. Let me discuss a few thoughts:
- Over-consumption – we are operating in a world where we are trying to maintain the same base levels of per capita consumption but just trying to make them feel ‘greener’. We should perhaps consider how and what experiences we can substitute those material things with. No one is saying that making money and sustainability do not go hand in hand but we need to revisit our priorities as a society
- Short-termism – there is scepticism about jumping on EVs full-swing given the ‘this looks fantastic right now because whilst we are not sure of the true ramifications, it is the polar opposite of what we consider bad and we will deal with the consequences later’ aura. But this extends to other areas beyond EVs too. People tend towards binary thinking; the world is not binary and so we need to consider that moderation is perhaps our friend
- Slow adaptation – embedding adaptation into our business models. We are not going to mitigate the extreme climate events we see and their effects. But adaptation is about creating an infrastructure that minimises those effects and that protects the communities most impacted by them
- Impact investing & pension solutions for the old economy – there has been a lot going on in this space globally, but solutions have not been considered as effective as they could/ should be. Business models tend to largely be the same and so there is much to still be achieved from a true impact perspective
These are significant risks. They are also great opportunities for businesses looking at making finance greener, more inclusive.
Environmental and social responsibility vs financial reward
From a strategic viewpoint, any start-up that focuses solely on money is following a defective path. If you care only about profit, then that is a governance issue at heart and it means most likely that your decisions about your strategic direction, hiring, team morale, interactions with potential partners, how you qualify investors – the human aspects which are integral to a successful business – will not be healthy ones, integral to your business’ sustainability.
From an investment point of view, more investors are looking at how companies are incorporating ESG factors into their considerations. ESG ultimately concerns risk mitigation and therefore factoring those costs into your business model which have until now been unquantified. And if you are a B2B SaaS FinTech then you are also going to be dealing with financial institutions who are highly regulated and obligated to their shareholders and clients, to deliver both sustainable and enterprise value.
Ultimately, I want to have left a net positive impact when my day on this earth is up. So I think a lot about when I am in the autumn/ winter of my life – how I want to look back on my journey and the legacy I want to have left behind. Everyone has the choice between either being a passive transient in this world, merely existing, going about our business and surviving, or we can choose to leave a positive mark behind us and a better future for all our future generations. I believe my purpose is the latter.
That is why I started The Green FinTech Forum (GFTF). A global initiative for anyone interested in taking advantage of the opportunities for green fintechs and other organisations offered by a sustainable economy. I am building the infrastructure from the ground up to facilitate the steady growth of this global community. I invite corporates, investors, academia, thought leaders with a mission to accelerate the convergence between green finance and a more sustainable world for all, to join the forum.
To learn more about the initiative: