FinTechs are uniquely positioned to leverage technology that brings about purposeful change. From implementing carbon reduction strategies by introducing ‘green’ financial products, to creating a marketplace for underserved communities and fostering a culture of diversity and inclusion – there are several ways in which FinTechs can successfully meet ESG objectives.
Advanced technology, such as Big Data, Artificial Intelligence, and real-time intelligence are enabling FinTechs to implement environmentally friendly green solutions and sustainable practices.
The highly sophisticated, cost-effective, and sustainable banking and payment systems developed by FinTechs can help businesses reduce their carbon footprint. Blockchain is one such example that is being leveraged to benefit the planet. As a more secure and decentralised record of transactions, blockchain helps to have see-through supply chains, where there is full transparency of products from their source to store. This allows the consumer to correctly track where their green investments are being spent and how they’re being used.
In the UAE, FinTechs are increasingly recognizing the importance of sustainability, keeping in mind the nation’s Net Zero by 2050 strategic initiative.
The value of DIFC’s green or sustainable Sukuk and bonds is growing and now accounts for more than 16.2 per cent of the total outstanding bonds, which is equivalent to more than USD18.1 bn. (Source)
It has been seen that ESG-focused FinTechs can achieve rapid growth and attract investment capital to support their efforts to improve the environment. A report by Mastercard states that venture funds placed around 2.5 times more equity into ESG-related FinTechs in 2020 as compared to what they invested in 2019 (growing from USD700 mn to USD1.8 bn).
So, what has changed? What has triggered FinTech companies to become more sustainable?
As technology evolves, and consumers increasingly demand more conscious products and services, FinTechs are having to think and act sustainably.
Today, while the market for sustainable products and green investments is booming, there is a need for transparent corporate sustainability management to steer clear of greenwashing and identify products that make false and irrelevant claims of sustainability.
- https://mena-fintech.org/wp-content/uploads/2022/11/MFTA-SFA-Sustainability-Report-2022-Final-opt-1.pdf
- https://www.fintechfutures.com/2022/04/esg-and-fintechs-how-firms-are-benefiting-from-an-esg-focus/
The self-assessment tool introduced by the Dubai Sustainable Finance Working Group (DSFWG) and developed in line with UNSDGs, helps companies measure the level of their Environmental, Social and Governance policies and practices. This can create a robust impact for investors, customers, and employees, aligning with DIFC’s commitment to driving the future of finance in the region.
Adopting best practices and promoting financial and environmental sustainability will enable FinTech companies in the MENA region to differentiate themselves and help drive business efficiency and customer loyalty, while attracting and retaining talent.
These discussions will take centre stage at the Dubai FinTech Summit later this year. At the Summit, DIFC aims to bring together global FinTech experts and technology innovators to a curated audience to discuss all things FinTech. From Web3 to metaverse, blockchain to decentralised finance, everything will be the focus of deliberations at the Dubai FinTech Summit, taking place on 8 and 9 May 2023 at Madinat Jumeirah in Dubai.
