Environmental Sustainability and Finance: Poker or Chess?

In early July, Onalytica published an article on Sustainability with a focus in the financial services sector. Comparing the WEF`s Global Risks Reports over the past 10 years[1], they highlight a stunning shift.

We are confronted with the reality that Sustainability risks are Business, economy, and Societal risks. All industries are realizing this and the financial sector is no exception. As usual, action is lagging.

Onalytica ranked finserv influencers that are active in Environmental Sustainability topics. These are the ten topics that they identified

Screen Shot 2019-07-22 at 08.53.55

With the top three topics Top 3 Environmental Sustainability topics being:

  1. FinServ Innovation & Renewables
  2. FinServ Innovation & Circular Economy
  3. FinServ Innovation & Reducing Emissions

I was not surprised at all that Citibank and BNP Paribas were in the top 5 corporate brands that have been influencing these debates. I was not surprised with the top 5 FinServ influencers driving the Environmental Sustainability debate, Helen Li, Andreas Staub, Spiros Margaris, along with Ben GoldSmith and Sasja Beslik.

I was honored to be included in this list, which prompted to share insights around this topic.

Network Map FinServ + Sustinability (1)

We all in the financial services sector are very focused on transactions – Number of bank accounts, wallets, assets under management, credit lines, amounts of loans, return of investments, market capitalization, Price/Earnings, inflation, exchange rates, asset prices, etc.

Business plans are not driven by the distinction between creating Financial value versus creating Economic Value. Most people still think that this distinction should remain an intellectual debate for those that have time to discuss topics that are not bottom-line oriented. Move fast and break things is only focused in growth at any cost. And even though a lot of Fintech innovation is not focused on profitability but different KPI metrics (like, number of freemium users, or growth in online engagement, providing access etc), there has been no significant business culture change from Fintech startups. I am referring to the fact that even Fintech startups are focused on creating mostly Financial value. Their value proposition either has no potential to create Economic Value or they ignore it and miss the opportunity to build it in their business from launch. This shortsightedness makes it very difficult to add it on later when they grow into a large corporation.

Economic Value is much more than what is reflected in the balance sheet and income statements and stock market performance. It includes use, abuse, and leveraging of non-market goods, like air, water, sea habitats, rainforest, biodiversity, and the wellbeing of human beings.

A Financial services business that lowers transaction fees so that the underbanked can open accounts, seems at the surface that it creates Economic Value. But this is not the case necessarily. There are several aspects of such a Fintech business that need to be taken into consideration to determine whether they are a truly Sustainable organization creating Economic Value.

In my interview with Miguel R. Brandao, an entrepreneur, author of `The Sustainable Organization` book already in its second edition and co-creator of the #SORG index and the concept of Dolphin Organization, we discuss some of these issues  – Sustainability is a philosophy, not a marketing tool; it is a purpose not a KPI!

As Miguel points out, a business that operates in its value chain as a player in a poker game is not the same as a business that operates like a player in a chess game.

Paolo Sironi, is also preaching TRANSPARENCY, as the only way towards Sustainable Banking innovation. I had the privilege to be the 1st to interview him just after New year`s (2019) about the core ideas in his latest bestseller “Financial Market Transparency”.

Any financial services business, be it an incumbent or a Fintech startup at an early stage or unicorn status, can start by asking themselves the following:

Are we as a company, playing poker or chess with our employees, our suppliers, our customers, and the environment?

If the three top risks are all environmental according to the WEF, then how can any financial services business be treating these as exogenous factors?

[1] The 2019 Global Risks Report from the World Economic Forum.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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  1. An excerpt from Chris Skinner Blog:
    This is Ant Financial’s stated ambition: to serve the excluded. That is what their strategy is all about: inclusiveness. In fact, I was surprised to hear the story of the Ant Forest, as it’s all about making a better planet. Ant Forest is a game, but it’s part of the Alipay mobile wallet. The idea is that every time you pay, you can offset your carbon emissions in the app and add more points towards your goal of planting a tree. You can also see how your friends are doing, and steal some of their points when they’re not looking.
    The results are impressive. The program launched in the summer of 2016 and, as of April 2017, had over 220 million users. These users had already contributed carbon emission reductions of 5,000 tons per day. It has further planted a total of 8.45 million trees, which reduce carbon emissions another 2,500 tons per day.
    Generally, the message sent by everyone I met in Hangzhou was that they’re trying to make a better planet and society, giving everyone the opportunity to achieve with a consciousness. This was the most surprising part of my stay with them, to be honest, as I never expected to hear about making better people, better society and a better planet, but that message was embodied in everything they do. It is a passion, and one that is exuded by the founder of all of this: Jack Ma

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