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Whether it’s the widespread economic turbulence that’s given rise to cost-of-living issues and rising interest rates or the fact that the eyes of the world are now focused on sustainability and better business practices, ESG is one of the biggest concerns for any consumer-facing brand in 2023. According to a 2021 report from Deloitte, one in three consumers has stopped purchasing from specific brands due to ethical and sustainability-related concerns. 

However, it’s not just consumer brands who are joining in on recognising the importance of environmental, social and governance; it’s also becoming a top priority in global financial markets. And leading the charge for a more ethical financial industry is the Fintech sector. 

Fintech Breakthroughs 

Fintech, a portmanteau of financial technology, is a sector that integrates bleeding-edge tech within financial services, essentially to make the sector more efficient, accessible and user-friendly. Everything from digital wallets to online trading platforms and even blockchain and cryptocurrencies fall under the banner of financial tech. What unites companies and start-ups operating in the space is that they leverage the latest advancements in tech, from artificial intelligence to big data, to disrupt traditional banking and financial institutions. 

Meanwhile, the massive success of blockchain and cryptocurrency has, in turn, spawned new offshoots of fintech. Blockchain powers the DeFi sector, of which many fintech start-ups are also a member, while cryptocurrencies have given rise to GameFi. This digital gaming sector encompasses everything from online casino games to NFTs and the metaverse. 

Being a predominantly digital sector, fintech is well-positioned to have a positive impact on environmental and social issues. In fact, it wouldn’t be too much of a stretch to say that fintech has the potential to create substantial societal and economic breakthroughs, particularly since a number of new start-ups have built ESG practices into their business models.  

We’ve already witnessed the meaningful changes that the sector has been able to bring about in recent years to “the global unbanked” with innovations like inclusive financial services and mobile payments. Now, fintech could unlock the more complex aspects of ESG and set a blueprint for the future of ethical finance.  

The Fintech Firms at the Masthead 

Fintech will play a leading role in promoting ESG principles in numerous ways, not least of which include implementing ethical and sustainable practices, utilising green tech, and collaborating with similar ESG-focused partners. Several companies and start-ups have already begun to set up the changes they want to see in finance and beyond. Here are three fintech firms at the ESG masthead:  

Algbra, the Ethical Challenger 

To Algbra, the “ethical challenger” start-up, the concept of ethical finance is more than just end products; it’s the way a firm operates as an organisation. Algbra has instilled a values and ethics policy into its brand, ensuring that customer funds are used and invested in a positive way. Fizel Nejabat, co-founder and COO, has confirmed that the firm “makes all our key partners sign up to that values and ethics policy”, ensuring that the end consumer knows their funds aren’t contributing to industries that can negatively impact society.  

The challenger bank launched at the end of 2022 following 18 months of development and has already caught widespread attention for how it does business and values customers. A London-based start-up, Algbra is also helping to mobilise new banking demographics by complying with Shariah regulations – ensuring that the UK’s Muslim community is no longer an underserved market. Furthermore, it offers carbon offsetting on its mobile app and has recently launched a donation feature, allowing customers to donate to several charitable organisations straight from the app. 

Clim8, Green Investing 

In 2023, not all traditional investing platforms and methods will be aligned with ESG. For example, portfolios that encompass big tech companies like Apple or Amazon may not necessarily appeal to users who want to feel like they’re making an impact with their investments. For the fintech investment platform Clim8, in order for fintech to make a difference, it needs to offer users specialist, active investment options. 

This “green investing” start-up is taking an active role in addressing climate change by allowing users to invest in a portfolio of companies that are already tackling the issue. The sectors that users can invest in via the platform include clean energy, sustainable food, clean tech, and smart mobility. 

Ophelos, Debt Resolution with a Social Purpose 

Ethical financial technology also extends to the opposite end of the spectrum of investment and banking opportunities. Ophelos, a London-based start-up founded in 2019, has positioned itself as a debt resolution company with “a social purpose”. 

According to CEO and co-founder Amon Guaiumy, truly little innovation has occurred in the debt collection sector in recent years, which leads to “underinvested and underdeveloped” departments and agencies as well as strained customers. Ophelos aims to provide a more socially focused experience for customers while making the process of collecting financial areas more efficient for the businesses involved. The firm uses machine learning to figure out the most effective communication method, ensuring an ethical and individualised approach.