Win-win approach: How digitalisation can boost business and make the world a better place

Tech consultancy Thoughtworks identifies key areas for financial services firms to invest in and achieve sustainable growth

It takes only a glance at today's headlines to grasp the urgent need for climate action. Extreme weather events, famine and collapsing ice sheets - the list is long and disheartening. There is still time for change, and financial services companies are leading the way in delivering growth strategies that are sustainable.

"No single entity can tackle the environmental challenges in isolation," says digital innovation consultancy Thoughtworks chief commercial officer Sai Mandapaty. "Different organisations and industries come together to create a force multiplier effect. Technology and data can further amplify such an impact by becoming the connective fabric and providing insights and transparency while measuring outcomes," he adds.

Nonetheless, the financial services sector is uniquely placed to be the arbiter of positive change, thanks to its role as an enabler, mediator and investor.

Focusing on the right strategies for sustainable growth

So what is sustainable finance? There is no shortage of definitions; for instance, the European Union defines it as the process of taking environmental, social and governance (ESG) considerations into account when making investment decisions, leading to sustainable investments.

Sustainable finance investments already represent a significant proportion of global assets, and is projected to grow to as much as one third of all assets by 2025, according to some estimates. But as the climate crisis deepens, this is just the start.

To fully understand the opportunities, Thoughtworks uses the following four lenses to enable financial services companies to focus on the right strategies and technologies which will unlock sustainable growth for them and how they can best be prepared:

  • Human sustainability;
  • Social sustainability;
  • Environmental sustainability; and
  • Economic sustainability

Each organisation needs to understand how different solutions meet its specific needs. With its global network of more than 12,000 employees in 17 countries, Thoughtworks has the insights and experience to help. Its experts explore those four lenses to enable financial services companies to kick-start their efforts to drive sustainable growth.

Human sustainability: Carrying the nexus

When we talk about human sustainability, it covers those investments that maintain and improve human capital in society - typically in areas such as health and education systems or access to services, nutrition and skills, explains Thoughtworks principal consultant Muralikrishnan Puthanveedu.

"One example of this is the way digital financial services in developing countries can improve the lives and livelihoods of rural communities through meeting the needs of the female population," he says.

According to the Consultative Group to Assist the Poor (CGAP), women power rural economies - largely through agriculture - but few financial services providers today respond specifically to their needs. Just seven per cent of extension resources are targeted at women; and 14 per cent of donor resources are targeted at smallholder women farmers.

But change is possible - in Kenya, DigiFarm is an end-to-end digital platform that connects rural farmers with financing, training, insurance and a digital marketplace. Launched in 2017, it quickly grew to reach more than 1.5 million farmers, but few of those were women. DigiFarms expanded the role of its local agents to include visiting women farmers in their homes, helping those with limited literacy to register and providing other support. Today, women represent 36 per cent of DigiFarm customers.

Social sustainability: Innovating through technology

Today, 1.6 billion adults across the globe are unbanked and many more are under-banked. By harnessing emerging technologies, fintechs are boosting financial inclusion. Replacing cash with digital transactions has moved the needle on sustainability goals - virtual cards reduce the usage of plastic and metal, while lower cost fintech solutions further financial inclusion at scale.

The introduction of digital transactions has significantly changed sustainability goals. Photo: Thoughtworks

To envisage what is possible, consider the example of Indonesian on-demand multi-service platform Gojek. It started out as a ride-hailing app but has since expanded to support millions of its partners - drivers, merchants and businesses - and power billions of online payments and orders across transportation, payments, food delivery, logistics, entertainment, and lifestyle services.

In a country like Indonesia, where bank account penetration is low while the usage of mobile phones is skyrocketing, GoPay helps mobilise a large proportion of the population who do not have access to formal financial services. Visa and Thailand's Siam Commercial Bank announced investments in Gojek, citing its commercial potential.

Environmental sustainability: Financialising the environment

"When it comes to improving human welfare through protection of natural capital such as land, air, water and minerals, financial institutions play a pivotal role," says Mahima Gupta, a product management professional for fintech services at Thoughtworks.

"Initiatives like carbon credit trading are instrumental in delivering environmental sustainability. When combined with economic sustainability, we see financial institutions rallying resources to save important resources," she says.

The scale of such opportunities is vast. In 2019, the global carbon credit market was valued at US$211.5 billion in 2019 and is expected to reach US$2.4 trillion by 2027.

Financial institutions also play a pivotal role when it comes to improving human welfare through the protection of natural capital, according to Thoughtworks. Photo: Thoughtworks

Meanwhile, some banks are also looking at opportunities to reduce the impact of their existing revenue models. Dutch bank De Volksbank aims to reduce carbon dioxide losses by rolling out consultations to educate customers about their energy-saving options and home insulation.

Economic sustainability: Retailing the playbook

When it comes to economic sustainability, financial services firms need to ensure the efficient use of assets to maintain company profitability over time. This is frequently seen in efforts around green products and impact investments.

Impact investment used to be a niche terrain with specialist players and beneficiaries, but that is no longer the case. The Supranationals European Investment Bank (2007) and World Bank Group (2008) issued the first green bonds, with a commitment to invest the proceeds in environmentally friendly projects.

Green bonds encourage sustainability and support climate-related and environmental projects, including energy efficiency, pollution prevention, sustainable agriculture and sustainable water management. Green bonds accounted for over 11 per cent of total bond issuance in 2021, a four percentage point increase over the previous year.

Research suggests the efficacy of green bonds in supporting enterprises' green technology innovation.

To create a sustainable future, business strategies need to steer organisations to achieve profit from purpose. Leveraging technology will help gather accurate data and glean insights on how the contributions from the organisations are creating a real impact.

If you are interested in knowing how technology can help your organisation achieve and contribute towards making the world a better place, visit this website to find out what Thoughtworks can do for your business.

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