New report published today at event in Berlin co-hosted by the UN Secretary’s Task Force for Digital Financing of the SDGs, SDSN and the Green Digital Finance Alliance for the first time ever stocktake of the number of fintechs innovating on sustainability. The data shows that between 4 to 5 percent of the total number of fintechs in Germany are innovating on the UN Sustainable Development Goals.
The report is released today in connection with a high-level event in Berlin at the Allianz Forum. The GDFA is developing a framework for measuring progress of sustainable digital finance at country level to be launched mid-2020 with the UN Task Force final report. Germany has been selected as one of the test countries for the measurement and results are presented in the report “Focus Note Series on Fintech for Sustainability - Current Landscape and Key Opportunities”. GDFA initiated a collaboration with the German organization Conscious Fintech (read the full report here).
The following main findings are presented in the report:
Finding #1: Fintechs are the Sustainable Digital Finance Champions in Germany
The landscape reveals that mainly the fintech start-ups, rather than the incumbent banks, are innovating sustainable digital finance solutions. Banks prefer to cooperate with those younger fintech companies. However, only between 3 and 5 percent of the total German fintech landscape are delivering on the SDGs.
Finding #2: Germany is an SDG 7 Fintech Innovation Frontrunner
SDG7 is the goal which most of the German SDG fintechs innovate on. Hence, it is a clear stronghold of the German sustainable digital finance ecosystem to deliver innovative financing to transition to a decentralised and renewable energy system. These solutions mainly emerge at the edge of the fintech landscape where it overlaps with cleantech. Germany has a number of SDG 7 fintech champions, such as IOTA, acting as market makers and leaders for more fintech to follow. It is a market which can be expected to further mature with the new German blockchain strategy which positions DLT as a tool to be used in the energy transition, coupled with pioneering legislation on the ability of banks to hold crypto assets.
Finding # 3: Second runner up is SDG algorithmic investing and robo advisory
It is clear from the mapping that the German fintech innovation ecosystem has incentivised the design of SDG robo-advisory and algorithmic investing services. The majority of the solutions have clear purpose to unlock sleeping savings into sustainable assets and projects by offering automated portfolio management with a low threshold for minimum investing. Most of the robo-advisors invest into ETFs and stocks, not into unlisted sustainable assets such as green SMEs. Even though the first regulated STO in the EU was issued in Germany this was not a sustainability focused STO.
Finding #4: High alignment between fintech innovation landscape and policy priorities
The landscape analysis shows a high degree of alignment between the supply side of SDF fintech and the SDG priorities of Germany. The largest concentration of fintech innovate on SDGs 7, 9, and 13, which mirror the national policy priorities.
Finding # 5: Limited degree of policy integration
The policies and strategies on digitalization (e.g. the blockchain strategy) tend to integrate sustainability whereas the sustainable finance strategy does not explicitly ascribe a role to fintech up to now and there are no defined targets for sustainable fintech. Environmental policy measures and notes have the highest degree of integrating environmental and digital trends, but these are not specifically fintech focused. They rather focus on integration of a broad spectrum of digital sectors.
Opportunity Avenues
The findings point to a number of concrete opportunity avenues to strategically leverage SDF as a tool to scale financing of the German SDG country priorities.
- Accelerate SDG 7 fintechs to fast-track finance of the energy transition
- Green STO’s as a next step to unlock citizens and financiers of the green transition
- Fintech to innovate public financing of public good SDGs
- Financing the SDGs with a programmed Central Bank Digital Currency
- Personalisation of SDF solutions - private data for green behavioural change
- Pilot Green Robo-advisory and green algorithmic investing to channel capital into underlying green smart assets using IoT