The financial system as a major driver

The role of the financial system in achieving the seventeen “Sustainable Development Goals” (SDGs) defined by the United Nations has been the subject of intense media discussion in recent years. Examples include the role of banks that are still investing in companies that are bad for climate change, poorly paying workers, or relying on child labor. It is estimated that only 5 to 25% of all assets worldwide are invested sustainably today. In order to change this, a number of initiatives have recently emerged at the international level. These include, for example, the Task Force on Digital Financing of Sustainable Development of the United Nations Environment Program (UNEP), the G20 Green Finance Study Group (GFSG), the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD), the Coalition of Finance Ministers for Climate Action or the EU Action Plan on Sustainable Financial Investments. Despite these numerous initiatives, only a few large financial companies have started to align their existing business models with the SDGs. At the same time, however, a growing number of SDG-focused startups have emerged that explicitly integrate SDG-oriented goals into their business models. They see an SDG approach as a competitive advantage that enables them to deliver both business and sustainability benefits. They very often use FinTech as a basis. FinTech solutions have an enormous potential for achieving sustainability goals. They not only place the consumer at the center of action, but also create more transparency. Examples are robo-advisors that focus on sustainable investments, financing platforms that only consider startups that also pursue sustainability goals, or index insurance solutions that focus on the effects of climate change and natural disasters.

Only few radical innovations today

In a global analysis of 126 startups, the Swiss FinTech Innovation Lab at the University of Zurich in joint research with Stanford University was able to identify patterns that characterize current developments. Most of the identified startups currently come from the USA (20%), followed by Switzerland (16%), Great Britain (14%) and Germany (10%), which together represent 60% of all startups in this area. The remainder is spread across the Netherlands (6%), Singapore (4%), Australia, Israel, Spain (3% each), Canada, Sweden, China, Finland, France and Gibraltar (2% each) and other countries (9th %). The analysis also showed that most startups have primarily geared their business models to incremental improvements of the status quo (89%) and are less focused on radical innovations (11%). In addition, the results show a strong focus on peer-to-peer networks (48%), while a smaller number focuses on the internal (33%) and inter-company areas (19%). From a process-oriented point of view, the financing area (37%), trading in securities or certificates (33%), investment solutions (26%) and advice (23%) dominate, while risk management (13%), payment solutions (7%) and life – and non-life insurance (6% each) are currently underrepresented.

Cross-industry ecosystems

The financial sector also plays an important interface role in many other industries. These include, for example, the energy sector and the public sector. Examples of the first-mentioned area are the Share & Charge platform for charging electric vehicles or WePower, a marketplace that connects companies directly with producers of green electricity, and Power Ledger, an energy trading platform that enables the purchase and sale of renewable energy. For example, Share & Charge aims to reduce the transaction costs of cross-supplier payments when charging electric vehicles using blockchain technology. By making electric vehicles more customer-friendly, this payment solution indirectly contributes to changing consumer behavior. For the public sector, these are, for example, C02 certificate trading and digital IDs. On this basis, other services such as cash transfers can be provided more efficiently, transparently and securely through digital vouchers and wallets.