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How fintech innovations help systems align finance with sustainable development outcomes 23 September 2021

Dhafer Saidane, Head of MSc Sustainable Finance and Fintech at SKEMA Business School, talks with Efma’s Boris Plantier about the new Master’s program that is tailored to modern-day challenges in the financial services industry. 
Financial institutions have this image of seeking profit above all else, even if it means making ethically questionable investments. Are ethical investments and profits compatible?
 
Today ethical/CSR investments and profits are compatible. For example, in recent years, we have seen the emergence of impact investing. The sector is growing strongly. Impact investment funds have a dual objective: a financial return and a social, societal, or environmental impact. There is a fair balance between these two objectives. 
 
There are at least three main benefits of ethics and CSR for companies:
 
Improve a company's profit margins. Customers are increasingly choosing companies that show concern and take action on societal and environmental issues.

Boost the public image of a company. Businesses that care about public opinion try to convey a positive image of themselves and of their social responsibility to the public. Providing high-quality, excellent customer service, a good after-sales service, and getting involved in civic causes shows how much the company cares about its customers and the company. Companies with good CSR policies tend to receive better media coverage. This approach improves the company's image and its reputation effect.

Improve the attractiveness of companies for investors. A company’s social responsibility is part of the criteria that potential investors use when deciding whether or not to invest in the company. CSR is also important in improving a company's stock price, which is essential in attracting investors.
 
Why do banks need fintechs in sustainable finance?
 
There is no doubt that fintechs play a vital role in the day-to-day operations of banks. Banks and financial institutions can solve many of the problems they currently face through measures such as adopting cloud services and partnering with fintechs. Today, most banks do not have the in-house knowledge to solve all of the problems they face with their existing systems. 

Therefore, engaging in partnerships with fintech companies and cloud service providers will enable them to acquire the expertise they need to upgrade and implement new product offerings. This has many advantages. FinTechs can provide new and innovative underlying services that will further help banks accelerate their digital transformation journey.
 
The United Nations Environment Program (UNEP 2016) has identified over 24 fintech applications for sustainable development. What types of problems will these applications be able to solve?
 
Fintech innovations help systems align finance with sustainable development outcomes on at least three levels:

• Much greater financial inclusion by drastically reducing payment costs and providing appropriate access to capital nationally and internationally for the “unbanked”, “underbanked” and small and medium-sized enterprises.

• Mobilize large-scale national savings to enable long-term investments geared towards the long-term sustainability of the real economy by investing in sustainable development innovations and resilient infrastructures.

• Improve financial protection, risk management, risk transfer, and risk diversification for vulnerable and exposed communities, real economy assets and infrastructure and natural ecosystems.
 
What are the most promising technologies in terms of CSR?
 
The use of technology in finance is not new. A big change is now expected with the innovative application of several technologies, notably involving blockchain, the “Internet of Things”, and artificial intelligence. This the combination of technologies in this new ecosystem makes the current wave of disruption different from what we have seen before in finance. Fintech innovations promise a more efficient, accessible, and less vulnerable financial system.
 
In terms of sustainable development, we observe new projects that were more long term and more CSR-oriented thanks to these new technologies in terms of traceability and transparency. This new ecosystem increases inclusive prosperity for all, solidarity, natural resource productivity, social, economic, and environmental resilience, and intergenerational decision-making. Many promising examples have emerged in sub-Saharan Africa, such as, Kenya's “M-Pesa” mobile payment service. 
 
You are launching a master's degree (MSc) in Sustainable Finance and Fintech. Can you introduce this new program?
 
The goal of this new MSc is to solidify the intellectual framework around some emerging concepts: sustainable finance, fintech, and CSR, which seeks to redefine the concept of value creation for business in the twenty-first century. The purpose of this MSc is to contribute to the reform of financial education and business practices. We redefine not only how businesses approach their functions in practice, but also how these subjects could be taught in a business school. This program will serve as a framework for students to help respond to the CSR disruptions that they face every day.
 
SKEMA has made a joint commitment with several major institutions and organizations to support financial institutions in their efforts to achieve greater transparency and promote best practices in sustainable finance. These institutions are partners in the new MSc Sustainable Finance and Fintech program, which starts in September 2021.

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