A bottom-up movement grows in size with fintech-startups, that aim to solve the UN Sustainable Development Goals. Foto: Gettyimages

Cryptocurrency can combat poverty and corruption

Worldwide, a growing number of fintech startups combating world challenges come to life. Founded with a goal to solve one or more of UN’s Sustainable Development Goals, the fintech startups might have a greater impact than many nation states, predicts Danske Bank.

The financial sector is absolutely vital if the world is to reach the Sustainable Developments Goals, in short SDGs, set by the UN. The SDGs consists of 17 specific goals and targets which together are to secure a sustainable future for both planet and humanity by 2030.

Till now, barriers within the financial system have hindered sustainable development to enter the global, common agenda. However, new solutions for long known problems are taking shape in financial startups worldwide.

Something is really cooking here

”Something is really cooking here,” says Cecilia Repinski. She is the Executive Director in Stockholm Green Digital Finance, which has as its focus to test, accelerate and upscale environmentally-sound investments.

And she is sure of her case: Fintech can make the world a better place. The number of startups providing solutions for sustainability only grows worldwide.

Today, the market for environmentally friendly and sustainable investments still fall short of the actual demand and the costs are too high. Technology, however, could change this.

“As we are speaking, we are developing a blockchain technology which can lower the costs and simultaneously verify the impact of the environmentally friendly solutions,” she says.

Cause endorsed by the UN

Stockholm Green Digital Finance is working on making sustainable investments grow in size and numbers. A continuing task backed by both private funds, banks, Pension Funds and the UN.

“It will take a lot of work in order to upscale the market and many pieces are still missing in the puzzle as a whole. Our piece is technology. By that we can lower the costs to invest in sustainability as well as make the market available for more to enter,” says Cecilia Repinski.

Endorsed by the UN, Stockholm Green Digital Finance is today the leading pioneer hub in the world to test and present fintech solutions supporting sustainable development.

Cryptocurrency without corruption

The Swedes are not alone. In China, the fintech solution Alibaba has made it possible for a number of female entrepreneurs to obtain loans for the development of their respective businesses.

The solution uses blockchain technology to earmark transactions, making sure the money reach the right recipient but also the intended cause.

In a similar way, Trine, a startup based in Göteborg, has developed a crowdfunding solution. It secures microloans are to be used for the application of solar cells in areas without electricity instead of ending up in the pocket of someone corrupt.

Usually half of the money meant for projects in developing countries disappears unaccounted for in the transaction between the sender and recipient, notes Sofie Blakstad, CEO in the Danish fintech-service hiveonline and consultant for Stockholm Fintech.

The virtual currencies, however, can make sure the money actually reach the right people and projects and not corrupt middle men, traders of weapons or as support for other illegal activities.

Blockchain can be applied in taking down the barriers which currently hinder sustainable development

”One of the major obstacles in the work for sustainability is that people are unsure of where their money actually ends up. In the Nordic countries we have a high level of trust. However, in most parts of the world the financial systems are not to be trusted. This is where blockchain, artificial intelligence, big data and Internet of Things can be applied in taking down the barriers which currently hinder sustainable development,” says Sofie Blakstad.

Technological innovation helps the small businesses

With a background in the traditional world of banking, Sofie Blakstad knows what she is talking about. She was part of building the first online bank for UPS and has helped Nordea in restructuring their business. Furthermore, at the UN, World Economic Forum, G7 and G20 she has pushed forward the agenda of how technology can combat the global challenges nation states, established banks and international organizations all struggle with.

Her own company, Hiveonline, has multiple tasks.

Partly, it’s the development of an online platform on which small companies can handle their payments to customers and distributors. The platform also makes it possible for the customers to rate the service. Moreover, it is monitored to which degree the companies conduct their business sustainably and in accordance with the SDGs.

”If a company wishes to be employed by the Municipality of Copenhagen, one has to prove to be both ethical and sustainable. And if a company wishes to be assigned tasks by the EU, one has to show an interest in several questions and topics, for instance equality.  The technology we use, like Blockchain, can help verify how sustainable the activities of a company actually are,” says Sofie Blakstad.

The main motivation for hiveonline is that sustainability has almost exclusively been a concern for large companies. Till now, small and middle sized companies have not been able to handle the costs it takes to prove a sustainable conduct of business.

Considering that up to 80 percent of all businesses in developing countries are rather small, there is a significant potential in helping the small and middle sized companies and by that contribute to reach the SDGs set by the UN.

“It’s a challenge to prove a sustainable conduct of business and to verify it actually doesn’t have a negative impact on the globe, because one might make an environmentally friendly choice in one area but simultaneously increase the emission of CO2 in another,” she says.

A wish to save the world

According to UN, it will demand an investment of 2,5 trillion dollars from private funds if the sustainable development goals are to be reached before 2030. Sofie Blakstad believes technology and fintech solutions can help with the quest for money and attract investors.

I want to help save the world. Who wouldn’t

“What the banks can do to help the small businesses is very different from what someone with better technology is capable of. That’s the idea in hiveonline. I want to help save the world. Who wouldn’t” says Sofie Blakstad.

Follow your ecological footprint

Also Denmark sees its share of fintech start ups with the ambition of providing sustainable, financial systems. Several of them address one or more of the UN’s SDGs directly.

One of them is Metoa. The fintech-startup wish to make investments in sustainability more relevant and apparent for the individual in everyday life. As the average Danish citizen has 145.000 DKK in savings, there is a potential for bringing much more money into circulation and more specifically in sustainable development.

Metoa is working on the development of a digital platform with three themes within its possible to invest: Renewable energy, innovative health solutions and microloans for entrepreneurs in developing countries.

The platform, which is still underway, will be 100 pct. digital. In correspondence with the given user’s values and economic capabilities, the service will come up with suggestions for investments. It is moreover possible to follow the investment and its impact – for instance to see how funded solar cells contribute to a reduced CO2 emission.

Business with multiple bottom lines

Another example is the Danish startup Penstable which wish to make it possible to invest pension funds in accordance with the SDGs.

“The SDGs need private capital. Pension Funds is an excellent starting point. However, despite the wishes of the actual owners of the savings, many funds today are invested in coal, oil, tobacco and weapon. It’s a paradox we want to change,“ says Niels Fibæk Jensen, who gave up a career in the UN to found Penstable which he today is the CEO of.

At Copenhagen Fintech Lab, CEO Thomas Krog Jensen confirms the tendency of fintech startups working for sustainability.

“The number of fintechs with a sustainable outlook accelerates. Before, the agenda was set by the large companies. Now, with a growing number of fintech startups founded with the SDGs in mind, we see a bottom-up approach and new solutions for long known problems,” says Thomas Krog Jensen.

According to Klavs Hjort, Senior VP for Business Innovation in Danske Bank, the current developments are due to a technology now ready for making it possible to make a business do well by doing good.

Funds take up the picture

For the new fintech start ups the focus on sustainability is not only branding or part of a solid CSR profile – Corporate Social Responsibility. Rather, the fintech startups eye an opportunity for an actual business which investors are ready to be part of.

The founders of the new companies wish to make a difference in the world and aim to help solve one or more of the SDGs by developing a business ready for growth.

“This type of purpose driven tech companies may very well get further in the attempt of reaching the SDGs than many nation states,” says Klavs Hjort from Danske Bank.

The investors in the startups mainly encompass funds working with impact investments.

In Norway investors count for instance Katapult and in Sweden Norrsken Foundation. In Denmark the main investors are Villum Fonden and Velux Fonden which work with an objective of having 20% of their collected impact investments to be within Venture Capital.

In 2017, Villum Fonden and Velux Fonden states two investments have been made in sustainable start ups, more specifically G2VP and Capricorn. However, neither of the two startups is within fintech.

Among others, Golden Sachs took part. They are usually not associated with the aim of saving the planet. But they understand the potential and possibility for growth

Also Danske Bank sees an increasing need for providing sustainable options for investments, notes Klavs Hjort.

As more become aware of the possibilities of the blockchain technology and it becomes apparent that this is good business, an increasing number of traditional investors will get involved. At least that’s what Sofie Blakstad from hiveonline experiences.

“In one of the last summits I was at, the directors of the world’s largest banks discussed the possibilities in upscaling portfolios for investments in sustainability. Among others, Golden Sachs took part. They are usually not associated with the aim of saving the planet. But they were there because they understand the potential and possibility for growth. And that’s exactly what we need in order to become more sustainable,“ she says.