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Sustainability – From Option To Default

Sustainability – From option to default

Takeaways from the first Sustainable FinTech Meetup at F10 Incubator & Accelerator on 12.9.2018 (by Nadia Mondini).

What is sustainability, actually? While most of us have some kind of association in our minds, defining what sustainability actually means in objective terms is harder than we think – which results in a problem the moment people become willing to pay a price for it.

Precisely this difficulty was the elephant in the room at this year’s first Sustainable FinTech Meetup at the F10 Incubator on September 12th. While providing interesting insights into their work in consulting financial advisors and clients on sustainable financial products, Rodrigo Amandi (CFO at 3rd-eyes) and Patrik Schär (CEO at Selma) both highlighted the lack of a clearly defined concept of sustainability as one of the main difficulties they encounter. While the easiest, and in the past certainly most common, way to go about choosing where to invest “sustainably” was simple elimination of industries judged as reprehensible – such as weapons, tobacco, or fracking – that approach has become more and more impracticable. Not only do people attach different value to the various spheres of sustainability – some may have climate change mitigation at heart, others gender equality or poverty reduction – but the concept, from being primarily about companies’ main business, has come to be relevant in terms of their daily operations as well, now prompting questions regarding companies’ efforts to reduce greenhouse gas emissions, treat employees fairly, or invest in green technologies. Such a context overwhelms both advisors and investors, and the need for simple ESG criteria within people’s reach is becoming ever more pressing.

Another issue which both Amandi and Schär stressed is the still widespread perception that sustainable financial products be particularly risky and that their costs tend to outweigh their benefits. Investing in sustainability is still sometimes regarded as a form of charity, mutually exclusive with financial profitability – a misconception which needs to be addressed through better training to advisors and larger variety of products.

In spite of the difficulties highlighted, both speakers at the Meetup shared their optimistic outlook: while sustainability is yet an option to be actively chosen by investors, an opt-in, in the future it will be the default option. More accessible criteria catalogues and more extensive data will allow for better impact visibility, and investors will be able to choose products based on the causes they have at heart and the scope of their desired impact. In order for that to happen, however, product ranges, customer demand and advisors’ expertise will have to develop quite significantly – a lot of work remains to be done.

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