Impact: The Complexity is an Opportunity for Fintechs

Opinion piece

The talk of sustainability is sweeping across finance driven by consumer demand, shareholder action, evolving regulation and visionary individuals. This is forcing companies to adapt and scramble for solutions, while at the same time the many moving parts are creating complexity and uncertainty within the field.

In my opinion this seem to have the effect that many companies are holding back instead of taking action. Questions abound: What is sustainability exactly? How do we work with it?

Where is regulation heading? What will emerge as the standard framework?

Personally, I do not believe that we will ever get rid of the complexity. Sustainability has many faces: climate, health, education, reducing poverty, social impact, good governance etc. Also, there are many views on what is important reliant on personal views, regulation, corporate policy, the latest scientific findings or something fifth. In continuation of this there is a myriad of ways to dissect, measure and report on impact.

Waiting for clarity and an overarching model to give a singular answer is futile, in my humble opinion. And it is not really an option as action is needed now.

Rather, the complexity can be embraced as an opportunity instead of an obstacle. Fintechs could and should take the lead and do what they do best: create clear options in a nuanced space with user-focused solutions where customers can evaluate for themselves - and choose offerings that match their sustainability preferences. As fintechs, we have the means to be pragmatic and get going while pushing the boundaries for what is possible.

Distinguishing between ESG and Impact One simple mechanism to create more clarity in the debate is to distinguish between ESG and impact. They are different but complementary lenses on sustainability often mixed up in the general debate.

ESG is focused on how a company is run. To be very simplistic, does the company minimize energy-use in the production (E), does it treat its employees well (S) and does it shy away from corruption (G). All types of companies can get an ESG rating, also tobacco and oil companies. Impact is focused on what a company produces. For example, energy or food. And this can lead to a view that a company producing windmills is considered to have a positive impact while a producer of oil is not, or that a producer of plantbased burgers is chosen for its impact while a steak producer is not. Mixing impact and ESG often creates confusion.

Most of the EU-legislation and initiatives in the corporate world are focused on ESG (particularly the E) and a lot of impact initiatives focus is on the climate. ESG and climate issues are critical, but there is amble opportunities to embrace other dimensions of ESG and impact. This is needed with large funding gaps across the board, which, in my opinion, translates into business opportunities for fintechs to grab. Fintechs are well suited to do so as culture, mindset, customer focus, innovation

Jakob Lage Hansen

Founder and CEO, DoLand

DoLand focuses on the impact of investments and makes it possible for everyone to choose which areas within sustainability their investment should focus on.

and tech are key elements to succeed. Not least in the social dimension where fintechs have traditionally had an edge regarding inclusion of the unbanked.

In DoLand we focus on the impact of investments and make it possible for everyone to choose which areas within sustainability their investment should focus on. We see how this resonates with those trying to live a sustainable lifestyle. For many it is an eye-opener that investments can be yet another tool promoting sustainability and 43% of our customers have never invested before. This emphasizes how a focus on impact can create relevance and expand the market beyond what traditional finance can reach and hereby mobilize more capital for impact. This is a win-win-win-win for our customers, the planet, our partners and DoLand.

The time is now. Fintechs have a golden opportunity to ride the strong trends within sustainability, embrace the complexity and use their innovative power to create crisp customer-focused solutions. Taking impact within finance to the next level.