This article is the first in a series of articles written by our Group ESG Officer, Nontokozo Khumalo. Nontokozo is responsible for driving Multitude's ESG and sustainability programme. She has over 10 years of experience in financial services working in ESG and client management. She was previously Corporate Engagement Manager for the Climate Disclosure Standards Board covering the EU, and prior to that, a Sustainability Manager at Standard Bank Group in South Africa.
In this article, she is discussing current ESG trends impacting the FinTech industry and how Multitude is responding to them. Nontokozo is also exploring “greenwashing” and the relatively new term, “social washing.” Download the ESG report and read more about how Multitude is approaching its own ESG strategy and ambitions.
Three ESG trends for FinTech
ESG has seen rapid momentum within the banking and finance sectors, with financial institutions starting to actively identify and manage related business risks and opportunities. As a fast-growing player in the financial sector, FinTech is impacted by this momentum.
Many FinTechs have also achieved growth that introduces new responsibilities to a wider set of stakeholders, including those relating to ESG. Therefore, the biggest ESG trends will influence how FinTech evolves and positions itself within the sector.
1. Shifting customer expectations
FinTechs are faced with shifting customer expectations, and in addition to personalisation and other innovations, customers are increasingly demanding financial products that incorporate personal values on social and environmental issues. According to the 2022 Edelman Trust Barometer, 58% of stakeholders will buy or advocate for brands based on values and beliefs. Edelman also found that stakeholders want businesses to do more to address societal issues.
As ESG trends, customers are starting to pay closer attention to the link between how they access financial products and global challenges. The rise in climate strikes, geopolitical crises and awareness of inequality in what has been termed the “information age” will mean that FinTechs will need to use their capabilities to be responsive to the resultant shift in expectations.
2. Climate pledges
Banks and other financial institutions have been making net-zero pledges committing themselves to aligning with the Paris Climate Agreement objectives. FinTech is well poised to support global efforts to combat climate change, given that many FinTechs offer products that are fully online with no physical branches, and that they can leverage off existing business models to innovate and rapidly transform the financial sector. FinTechs have strong technological capabilities which can be used to support data collection and their IT functions can play a vital role in reducing emissions by transitioning from the use of energy intensive technologies.
3. Risks of greenwashing and social washing
Simply put, green washing is when a company promotes itself as green but at the core is not addressing environmental challenges. Much like traditional banking and finance, FinTechs, in taking advantage of the ESG trend and addressing shifting customer expectations, are also at risk of green and social washing. This is often the case when ESG is not linked to the core strategy of the company. The same can be said about social washing, a newer term which implies that companies not genuinely addressing social issues but marketing themselves as socially conscious.
FinTechs must brace themselves for ESG being a topic of interest for stakeholders and should utilise their technology skillset and innovative product development experience to meet these rising needs. This, whilst taking care to avoid greenwashing and social washing.
How Multitude is addressing ESG trends
As a fully regulated growth platform for financial technology with an ambition to become the most valued financial ecosystem, Multitude works to understand emerging ESG topics impacting our own stakeholders. The Group has published the 2021 ESG Report which sets out efforts towards integrating ESG into our strategies, starting with the setting of long-term ambitions which impact our customers, people and the environment whilst generating long-term value for our shareholders.
Our focus is on social and governance matters relating to people and processes whilst also embedding green and sustainable practices in our ways of working. This year we started measuring the carbon footprint of our offices and SME lending with plans to set targets and implement actions to reduce our emissions.
The individual business units (“tribes”) in the Multitude ecosystem, Ferratum, a consumer lender; CapitalBox, a business lender; and SweepBank, a shopping and financing app, leverage proprietary technology and our tribe segmentation model to drive financial inclusion by offering our customers easy access to finance appropriate to their needs and challenges.
Tribes' strategies are underpinned by our value of customer centricity which involves understanding customer needs and striving to give them the best experience. An example of this relates to the development of SweepBank products and services. SweepBank regularly engages with customers to ascertain which features and services customers would like to have. Customer insights feed into the product design process.
Nontokozo will be exploring how FinTechs can effectively embed ESG practice into their businesses in the next article in this series. Watch this space!
Disclaimer: The information provided in this article is intended for general informational purposes only. It is not intended to be, and should not be taken as, professional or financial advice.