How data drives the Impact revolution
Fintech has been on the radar of anyone paying attention in the financial world for the past three years. This year, the organizers of the World Fintech Festival (WFF) in Japan, a satellite of the Singapore Fintech Festival introduced a new dimension to the field — which usually revolves around payment solutions, regulation, KYC and AML (“know your customer” and “anti-money laundering”), and, inevitably, blockchain — with the theme “Impact Fintech”. In collaboration with Kiko Uehara, the founder of WFF Japan, I took the opportunity to bring together this panel on “How data will drive the Impact revolution” with three experts, SAP’s Anita Varshney, Donato Calace of Datamaran, and Karl Richter from EngagedX, ixo foundation and Instans.net.
So what is Impact Fintech? Imagine a Venn diagram of three overlapping circles — finance, sustainability and technology. We are at the middle where they converge, with Impact Fintech.
And what do we mean here when we say “Impact”? The Impact Management Project, a forum of 2,000 practitioners ranging from investors, asset owners, and foundations to international organizations, policy makers, and NGOs, has defined Impact, simply, as “a change in positive or negative outcome for people or the planet”.
To take it a step further, the Global Impact Investing Network, or GIIN, says that Impact investments “are investments made with the intention to generate positive, measurable social and environmental Impact alongside a financial return.” While we didn’t specifically address investing in this panel, I bring it up because in sustainable business and investing circles today, there is almost always a business case available that pairs good actions with profitability.
Impact is important, because, as we see it in our book “Leading Sustainably — The path to sustainable business and how the SDGs changed everything”, Impact is the bridge from ESG screening to the achievement of the United Nations’ Sustainable Development Goals (SDGs).
ESG started with investors and is now becoming a tool for business managers to make decisions around strategy and operational planning. But the practice of doing so is notoriously difficult, from collecting the right data to structuring it with an appropriate framework to understanding what it is telling you. Add to that that the field of sustainable accounting is both fractured and continually evolving and you have frankly, a right mess.
Will data solutions, AI and other technologies create clarity in these new realms of accounting and decision making and improve our ability to achieve Impact?
Investigating the technological solutions available provides an excellent window into how this field is rapidly evolving, and the standards that regulators are grappling with, in particular around this idea of Impact that companies and investors are trying to understand when it comes to how their activities affect society. For SAP, Datamaran, and to some extent Instans, scoping out their clients’ requirements means keeping abreast of changes in the voluntary and regulator disclosures for nonfinancial disclosure.
Two recent developments show that there is a potential broad harmonization on the near horizon: The International Organization of Securities Commissions (IOSCO), standard setter for the securities sector, announced this fall that it is working to standardize sustainability disclosures for securities and promote their use to asset managers and issuers. At nearly the same time, the International Financial Reporting Standards Foundation, which develops accepted global accounting standards, has a live, open consultation to determine the need for global sustainability accounting standards.
In the panel, we looked at the solutions that Anita, Donato and Karl are working on for collecting and analyzing data to simplify reporting and disclosure along those lines and to guide strategic decision-making, and what challenges and opportunities are in this field, and the implications for how we understand Impact as standards, frameworks, perspectives and solutions develop. (A full list of the questions we covered, and will report in Part 2 are listed below.)
To conclude, with apologies to Marc Andreessen, I’d say that what we are seeing is that not only is “software eating the world”, sustainability is taking a big bite as well. And we see these two fields coming together in the data management and insight solutions that we are looking at today.
When you look at “How data drives the Impact revolution” there are a series of further questions that should be explored, including:
— Why is there resistance to sharing Impact data?
— How do you think we will start to see non-financial information be handled by businesses? Regulatory bodies? By investors?
— What do these solutions mean for efforts to harmonize the “Alphabet Soup” of sustainability and Impact frameworks that see right now?
— What will change once these frameworks have become harmonized? What will happen next?
— Is there anything that you need to change in the regulatory environment to improve the solutions that you are offering? And how about in the businesses world?
— How do you see your work with these solutions in relation to the SDGs? In what ways do they advance progress on the goals?
— How will/should current thinking about sharing data change? And how do you see your platforms evolving as more digital solutions are developed?
— As your clients start to use your solutions, how does their understanding evolve? And what else do they ask you for? Have you see any clients move from analyzing risks to seeking to identify opportunities?
To find out more, contact Read the Air for a briefing on the state of Impact and digital solutions today
