ESG & Fintech. A second–and maybe last–chance to make our money work for our future // The Actionist

*Planet Earth First — designed by Eleonora Lampis — Junior Designer @Ener2Crowd*

In a world where every connection seems to be based on an economic-driven transaction, the concept of mixing ESG with Fintech is truly the second–and maybe last–great opportunity for each of us to redefine our relationship with money and the world itself. Making it work will make us a species more deeply linked with nature and allow a new credo to emerge that shapes a better and more prosperous future.

*This article is an abstract from my speech at the 2020 Milan Fintech Summit, for the ESG Investing Panel.*

At the 2020 Milan Fintech Summit, which was attended by excellent guests from the banking and investing world, I had the honor and pleasure to join as Ener2Crowd Co-Founder. As was evident from the fully attended panel discussion, ESG (Environmental, Social and Governance, which are criteria used by socially concerned investors to vet investments) is a hot topic as the industry questions how financial innovation, fintech and investing strategies will be affected by the growing public demand and business interest in sustainability.

The “one-size-fits-all” answer to this question is: “Sustainability will make the system work in an inclusive way for people”, which means considering people–as human beings–as the first and most important stakeholder, and including people–as market operators–as a possible shareholder (through debt, equity or buying capabilities).

This is a profound revolution for capitalism. In fact, the same day I was giving my speech in the #MFS2020 dedicated panel, it was being addressed by Pope Francis’s Benediction for the Council for Inclusive Capitalism, which called for a “a fair, trustworthy economic system that could address humanity’s biggest challenges.”

HH’s words came along many other big names issuing declarations of intent, all together worth as much as $10.5 trillion in assets, $2 trillion in market cap, and 200 million workers around the world.

They said to be all together pledging to create equality in opportunities and long-term value for all stakeholders.

My view on how ESG can transform the financial system is a bit more specific: ESG can empower finance, and financial technologies can boost ESG.

ESG can empower finance, and financial technologies can boost ESG.

Why? Because ESG in finance is not just an investment strategy, it’s a life strategy based on the idea that we should “make our capital work for us and our future and not the way round”.

The greatest truth we have learned is that in the past we have forgotten to focus broadly on wellness and social progress, and we have used money just to produce more money.

Incorporating ESG is not just a valid investment strategy because of the economic profitability it represents (which when disintermediated, might be at a 5–7% interest rate per year), but it is the way to survive on this planet, to slow down and reverse the “6th mass extinction” described by Elizabeth Kolbert. The first one we are assisting to in a conscious way.

How will this impact companies?

Businesses with good governance while caring for the environment and society will acquire a better position, because they’ll become accountable for their impact on the world, taking to heart what is most important for all us: our future.

This great change cannot just become a “sustainable-as-usual” approach without a global coordination and international standards will have to follow the speed of the flourishing examples we hear about every day.

The most important achievement related with ESG global standards is to give an answer to the huge call for making social and environmental costs emerge that make us more conscious of every decision we take in our market society.

We need international standards but I’m aware that this could be a very long process that could end into a political compromise.

Defining standards is about deciding which kind of goods and services we want our economy and society to be based on and I think this process should be organized in a bottom-up, inclusive and results-proof way.

We could start from a smaller geographic dimension, showing how it works and finally exporting it as an iterative example thanks to a global maneuver.

It is not so far from what was proposed by a very controversial name in the “climate affair”, William Nordhaus, who won the 2018 Nobel Prize in economics for having integrated climate risks and costs in financial and economic forecasting models. He recommended the creation of a “Climate Club” of Countries where members pay dues to promote GHG emissions abatement, with non-members paying to rebalance the “carbon leakage” (social and environmental dumping) that the globalized world is hiding inside the market itself. It is quite similar to the “Border Carbon Adjustment” by Joseph Stieglitz which was recently endorsed by Ursula Von Der Leyen. There is a path designed, let’s see how and when we will start to walk it.

And what about the impact of COVID-19?

There has been a brief slowdown in the attention for climate issues in this last very strange year. And we felt it, for instance, in Ener2Crowd (the sustainable investment platform I launched in late November 2019), we had an abrupt stop just as the lock-down was announced, but we weren’t set back and we discovered that there were people ready to believe in our message: A better future is what we should make immediately our money work for. It is convenient today and the only way for tomorrow’s existence.

People have understood, and maybe we have understood, that this is not just about gaining profits. This open process that today involves more 2.500 people is about giving humanity a second chance in its relationship with money.

Money is a tool. It is an instrument that has been created to define a balance between value exchange in a very rational way.

So which are the values we want to trade with money today? People are realizing that these values should be based on respecting the source of all of our richness, nature, and get back closer to it. It is our only home. International associations as the WEF (World Economic Forum) has specifically coined a new name for these values: the nature positive economy.

So why people should care so much about ESG when investing or using their money in a sustainable way?

In our experience, as a sustainable investing platform, the most important selling point is that we are perceived as a solid, efficient, effective answer to “do something” about climate change, and show that it’s not just a safe and wise choice, but also a convenient one.

When we see people protesting against politicians and policies, we can feel their effect because they represent a body, a solid mass in space-time which for a moment makes them feel that they will be able to shape the path of space-time (quite Einsteinian but so metaphorically close to the reality). But then they come home and they’re alone. In an even more lonely world today. And so the battle against the “carbon-as-usual-world” gets lost.

We represent one positive option: Make your money count! Because climate remediation isn’t just a duty, it is an opportunity.

That’s our selling point. That’s the reason why ESG can empower finance, and fintech can boost ESG.

You’re not alone anymore and you can make your choices count now for the future.

*Illustration from Eleonora Lampis — Junior Designer @Ener2Crowd*

Thanks to Alessandro E. Hatami for the stimulating questions and the great debate he setup and led.

Thanks to all the other speakers Oscar Di Montigny (Banca Mediolanum & Flowe), Giovanni Sandri (Black Rock Italy) and Paolo Zaccardi (Fabric, Banca Sella), for their precious words and reflections.

ESG & Fintech. A second–and maybe last–chance to make our money work for our future.

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