An ardent obligation and a business opportunity: Sustainability, ESG and digital innovation in financial services, healthcare & insurance

Despite the ever-present risks of greenwashing and the manufactured political backlash developing around sustainability and ESG around the world, there is a clear and present imperative to act on reasonable and proactive way on these matters.

Ardent obligation, of course, but also a rich vein of commercial, product and revenue opportunities for those companies seizing the moment and doing the right thing whilst opening new prospects.

Digital innovation and technologies have supported many positive developments on both mature and emerging markets contributing to provide new solutions to the poorest people whether to those unbanked through mobile money, those unable to access healthcare through specifically tailored digital and mobile health solutions, through specific mobile insurance solutions, through new mobile based solutions to improve recycling and environmental protection, etc.

In effect, Digital Innovation, sustainability and ESG (Environmental, Social, and Governance) strategies are increasingly intersecting and complementing each other. And it is nowhere truer than in financial services, healthcare, and insurance.

This convergence is driven by various factors, including changing consumer preferences, regulatory requirements, and the recognition that sustainability considerations can have a significant impact on long-term financial performance.

Digital humanism, sustainability, and ESG strategies are crucial in financial services because they align with ethical responsibilities, drive long-term value creation, mitigate risks, meet investor demands, navigate regulatory requirements, and enhance reputation and customer loyalty. They also create new business and product developments opportunities focused on addressing customer and market segments formerly ignored, excluded, or underserved both on mature and emerging markets. Inclusion becomes per se a commercial opportunity.

By integrating these considerations, financial institutions can contribute to a more sustainable and inclusive economy while achieving their business objectives.?

I am currently developing two major future virtual thought leadership events to start in the next few weeks on: “Digital Innovation, Sustainability and ESG in financial services” and “Digital Innovation, Sustainability and ESG in healthcare and life and health insurance”. Please contact me should you be interested to participate as a speaker and/or contribute as a sponsor. I am currently defining the agenda, content, speakers as well as the sponsorship packages.

I intend for these events to explore the ways sustainability and ESG increasingly matter in three different dimensions:

·??????Internally, impacting the operation and running of the companies and organisations and in their relations with their teams and employees.

·??????Externally, with regard to their relations with their customers, regulators, suppliers, etc.

·??????Commercially in terms of the opportunities coming from the development of new products, services and solutions addressing the formerly ignored, unserved or underserved needs of specific customer or market segments.

The virtual thought leadership events I am developing will also discuss how Innovation in financial services and sustainability/ESG strategies are meeting and intersecting in many different ways, for instance in:

1. Sustainable Investing:?Financial institutions are developing innovative investment products and strategies that focus on environmental and social sustainability alongside financial returns. This includes offerings such as green bonds, social impact bonds, and sustainable mutual funds or exchange-traded funds (ETFs). These products allow investors to align their investment portfolios with their sustainability goals and values.
2. ESG Integration: Financial institutions are integrating ESG factors into their investment decision-making processes. They are leveraging data analytics and technological tools to assess the ESG performance of companies and incorporate this analysis into their investment models. By considering ESG factors, investors can better understand the long-term risks and opportunities associated with companies, leading to more informed investment decisions. They can also open new commercial, product and business developments by addressing formerly ignored or underserved market and customer segments. Life and health insurance provides multiple examples of how this can be true.
3. Green Financing: Financial institutions are playing a crucial role in providing funding for sustainable projects. They are developing innovative financial instruments and solutions to support renewable energy, energy efficiency, and other environmentally friendly initiatives. This includes green loans, green mortgages, and sustainability-linked bonds, which offer favourable terms or incentives to borrowers based on their sustainability performance.
4. Fintech and Sustainability:?Fintech companies are leveraging technology to drive sustainability and ESG initiatives. For example, digital platforms are being developed to enable impact investing, allowing individuals to invest directly in sustainable projects. Fintech firms are also utilizing artificial intelligence, machine learning, and big data analytics to enhance ESG data collection, measurement, and reporting, providing investors with more comprehensive and accurate information.
5. Sustainable Financial Services:?Financial institutions are adopting sustainable practices within their own operations. This includes implementing responsible lending practices, reducing their carbon footprint, and promoting diversity and inclusion within their organizations. They are also increasingly disclosing their own sustainability performance and aligning their operations with global sustainability frameworks, such as the United Nations Sustainable Development Goals (SDGs).?

1. Digital innovation has played a fundamental role in developing new products, services and solutions addressing specific needs and customers.?Recent developments such as Visa creating a specific sustainable solutions group or the announced investments of over $5 billion by Mastercard into MTN’s mobile money and fintech operations across Africa as well as development in insurance by major insurers and reinsurers as well as insurtech start-ups around the world demonstrate the value of the opportunity.

Overall, the integration of innovation in financial services and sustainability/ESG strategies is driving the development of new products, services, and approaches that promote both financial and sustainable outcomes. This convergence not only addresses the growing demand for sustainable investments but also helps to accelerate the transition to a more sustainable and inclusive global economy.

Furthermore, Digital humanism, sustainability, and ESG (Environmental, Social, and Governance) strategies are increasingly important in the context of financial services for several reasons:

1. Ethical Responsibility:?Financial institutions have a significant impact on society and the environment through their investments, operations, and lending practices. Embracing digital humanism, sustainability, and ESG strategies reflects a recognition of the ethical responsibility that financial institutions have towards their stakeholders, including customers, employees, communities, and the planet.
2. Long-Term Value Creation:?Integrating sustainability and ESG factors into financial services is essential for long-term value creation. Companies that prioritize sustainability are more likely to have better risk management practices, improved operational efficiency, and enhanced reputation. By considering ESG criteria, financial institutions can identify companies that are well-positioned for long-term success, as they are more likely to adapt to changing market conditions, regulatory requirements, and consumer preferences.
3. Risk Mitigation: ESG factors are increasingly recognized as indicators of potential risks in investment portfolios. Environmental risks, such as climate change and resource scarcity, can have significant financial implications. Social and governance factors, such as labour practices, data security, and board composition, can also affect a company's financial performance and reputation. By incorporating ESG analysis, financial institutions can identify and manage these risks effectively, potentially avoiding negative impacts on investment portfolios.
4. Investor Demand:?There is a growing demand from investors for sustainable and responsible investment options. Individuals and institutions are increasingly seeking investments that align with their values and contribute to positive social and environmental outcomes. Financial institutions that incorporate digital humanism, sustainability, and ESG strategies can attract and retain these investors, thereby enhancing their competitiveness in the market.
5. Regulatory Landscape: Regulatory authorities are placing greater emphasis on sustainability and ESG practices in the financial sector. Governments and regulators are implementing frameworks, reporting standards, and disclosure requirements to encourage transparency and accountability in relation to environmental and social risks. Financial institutions that proactively adopt and integrate digital humanism, sustainability, and ESG strategies are better prepared to meet these evolving regulatory expectations. Major new EU regulations with regard to ESG Reporting and compliance but also for instance the Digital Services Act and the Digital Markets Act are encompassing this dimension at the core of their provisions. The EU Horizon program and other major funding and support to entrepreneurship and innovation have also been initiated in the past few months.
6. Reputation and Customer?Loyalty: Embracing digital humanism, sustainability, and ESG strategies can enhance a financial institution's reputation and brand image. Customers, particularly millennials and Gen Z, increasingly expect companies to act responsibly and make positive contributions to society. By demonstrating a commitment to ethical practices and sustainable finance, financial institutions can build trust, foster customer loyalty, and attract new business.

Stay tuned for the virtual thought leadership currently in development and feel free to contact me for more information!