MENA Fintech Association

How fintech companies drive SDG achievement

Exploring real-life examples of how fintech companies contribute to the Sustainable Development Goals

In the dynamic landscape of the unfolding Decade of Action, as the world hurtles towards the halfway point of the 2030 Sustainable Development Goals (SDGs), the urgency for governments and corporations to transparently align with these aspirations has never been more pronounced. “It is more important than ever before for governments and corporations to transparently share their commitments and accelerate their efforts to achieve our collective goals,” declares the UAE Ministry of Climate Change & Environment.

Simultaneously, a seismic shift is driving demand for eco-friendly products amid a digital revolution, rooted in a collective awareness of the impact of global warming. This momentum prompts calls for transparent environmental information, signalling a shift where genuinely sustainable brands, supported by credible claims, are positioned to excel. Businesses face an unprecedented call to action, with 82% of investors insisting on integrating Environmental, Social, and Governance (ESG) into corporate strategy. This reshapes the financial landscape, leading to a projected surge in the fintech-driven ESG solutions market from $21 billion in 2022 to over $160 billion in the next five years, according to KPMG. The convergence of financial technology and sustainability creates a completely unique possibility for positive change, guiding businesses toward a greener and more conscientious direction.

 

The ESG imperative: beyond environmental boundaries

ESG considerations move beyond environmental influences, encompassing social and governance factors of businesses. On the social front, financial technology performs an essential role in addressing financial inclusion and development, responding to the global call for services that benefit low-income individuals and communities. Finally, the importance of governance in ESG is increasing, with fintechs facing increased scrutiny of their ESG commitments as investors prioritize conscious decision-making about governance requirements and customer requirements.

Fintech has emerged as a vital force in achieving ESG objectives, garnering recognition from organizations like the United Nations for its crucial role in advancing SDGs. Fintech’s focus is on creating a more inclusive, ESG-resilient, circular, and environmentally friendly financial system that supports sustainable development. This perspective is reinforced by the G-20’s inclusion of “Sustainable digital finance” as one of its 2030 work-streams and the United Nations’ ongoing study of the link between fintech and Sustainable Development since 2016.

Fintech’s sustainability impact

Thriving in finance, fintech startups reshape industry dynamics by exposing weaknesses in larger organizations’ models. Their strength lies in integrating ESG principles from inception, attracting a diverse clientele and securing capital with improved governance.

As fintechs grow, they lead in sustainability, meeting customer demands and compelling competitors to accelerate ESG integration. The industry’s rising popularity stems from aiding firms and investors through specialized applications, driving sustainable economic growth with positive societal and environmental impacts.

Fintechs actively promote environmental and ecological development, directing funds to green projects and supporting renewable energy infrastructure. Utilizing tools like crowdfunding, big data analytics, blockchain, and AI, they consistently align with ESG criteria, making the financial sector more sustainable.

Beyond digital innovation, fintechs contribute tangibly to a healthier world, from reducing carbon emissions to promoting reforestation with initiatives like wooden cards. Urged by environmental concerns, fintechs prioritize sustainability, creating awareness, and setting an example for other industries through ‘green’ financial products and enhanced financial inclusion via digital payments.

Fintech’s impact across ESG domains

Fintech’s substantial impact within the ESG framework is evident across environmental, social, and governance dimensions. In environmental sustainability, fintech companies play a pivotal role in digitalizing transportation, combating deforestation, and promoting individual sustainability. Utilizing technologies like blockchain, satellite imagery, and mobile applications, fintech innovations actively contribute to positive environmental outcomes.

On the social front, fintechs play a crucial role in fostering financial inclusion, promoting literacy, and supporting SMEs, especially in regions like MENA. Noteworthy initiatives, such as the “Better Half” program and financial literacy projects, showcase fintech’s profound commitment to social impact and inclusivity. Spearheaded by M2P, the “Better Half” initiative specifically addresses challenges faced by women re-entering the workforce after career breaks. It goes beyond by identifying talented women, providing comprehensive training, skill development, and mentorship opportunities, empowering them for a successful transition back into the tech industry. Additionally, MENA fintechs extend support to SMEs through a range of financial products, including traditional lending solutions like loans and credit lines, alongside innovative options such as crowdfunding and peer-to-peer lending. Through the smart use of technology to streamline lending processes and reduce costs, fintech companies aim to provide SMEs with more affordable and accessible financing options.

In the governance domain, fintechs improve transparency and accountability, shaping a sustainable global financial ecosystem. Tools like the Green Fintech Classification and GDFA Readiness Assessment contribute to measuring progress toward sustainability goals. Fintech’s expertise in collaboration, technology adoption, and education positions it as a key player in advancing ESG initiatives.

Real-life examples showcased in the report underscore how fintechs actively drive sustainability. For instance, in Uzbekistan, the Ministry of Transport’s collaboration with UZCARD and O-CITY resulted in a remarkable 214% surge in digital payments within a year, highlighting the transformative impact of digital innovation in public transport. Additionally, EKKO in the UK leverages technology for carbon footprint tracking and offsetting, demonstrating fintech’s role in spearheading tangible and positive changes.

Initiatives like Paymentology’s financial literacy program, in collaboration with Blackbullion, aim to drive financial literacy among the youth and create a more equitable society by sponsoring young people from under-resourced communities. In the MENA region, fintechs actively contribute to social impact by improving financial inclusion, promoting literacy, and supporting SMEs.

Unlocking the potential of fintech: a transformative journey

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