1、SFF 2022 InsightsEnlisting FinTech to help create a sustainable futureDisclaimerThe opinions expressed at the Singapore FinTech Festival 2022 and quoted in this publication are those of the speakers.They do not purport to reflect the opinions or views of McKinsey&Company,the Monetary Authority of Si

2、ngapore,or Elevandi Limited.AcknowledgementsMcKinsey,the Monetary Authority of Singapore,and Elevandi would like to thank all those who contributed to this publication.From McKinsey,we extend our thanks to Rebecca Abramson,Asilah Azil,Christy Chua,Elaine Ee,Bharath Sattanathan and Jarel Tang.From El

3、evandi,we extend our thanks to Rafat Kapadia.iiEnlisting FinTech to help create a sustainable futureMcKinsey is a global management consulting firm committed to helping organizations accelerate sustainable and inclusive growth.McKinsey works with clients across the private,public,and social sectors

4、to solve complex problems and create positive change for all their stakeholders.McKinsey combines bold strategies and transformative technologies to help organizations innovate more sustainably,achieve lasting gains in performance,and build workforces that will thrive for this generation and the nex

5、t.The Monetary Authority of Singapore(MAS)is Singapores central bank and integrated financial regulator.As a central bank,MAS promotes sustained,non-inflationary economic growth through the conduct of monetary policy and close macroeconomic surveillance and analysis.It manages Singapores exchange ra

6、te,official foreign reserves,and liquidity in the banking sector.As an integrated financial supervisor,MAS fosters a sound financial services sector through its prudential oversight of all financial institutions in Singapore banks,insurers,capital market intermediaries,financial advisors and financi

7、al market infrastructures.It is also responsible for well-functioning financial markets,sound conduct,and investor education.MAS also works with the financial industry to promote Singapore as a dynamic international financial centre.It facilitates the development of infrastructures,adoption of techn

8、ology,and upgrading of skills in the financial industry.Elevandi is set up by the Monetary Authority of Singapore to foster an open dialogue between the public and private sectors to advance FinTech in the digital economy.Elevandi works closely with governments,founders,investors,and corporate leade

9、rs to drive collaboration,education,and new sources of value at the industry and national levels.Elevandis initiatives have convened over 300,000 people to drive the growth of FinTech through events,closed-door roundtables,investor programmes,educational initiatives,and research.A flagship product i

10、s the Singapore FinTech Festival alongside fast-rising platforms,including the World FinTech Festival,Point Zero Forum,and the recently launched Elevandi Insights Forum.iiiEnlisting FinTech to help create a sustainable futureSustainability is one of the most pressing issues of our time,demanding the

11、 attention of governments,corporate leaders,financial sector participants,and citizens generally.While much of the world has now rallied behind the imperative of reaching net zero emissions by 2050,the decisive question remains of delivering on these climate and sustainability commitments.History of

12、fers cause for pessimism.FinTech can play an essential role in breaking a legacy of inertia and marshalling the resources needed to bridge the substantial gap between current funding of sustainability and environment,social,and governance(ESG)initiatives and the projected investment required to meet

13、 global aspirations.The industry sits at a crucial junction bridging finance and technology.It can help mobilize the necessary capital and support innovative technologies that bring the world closer to net zero.But,first,the core obstacle of access to comprehensive and trusted data to weigh decision

14、s and integrate public-and private-sector efforts must be addressed.FinTech is already active on this front,which is why the Singapore Fintech Festival featured various sessions around sustainability,including a dedicated knowledge plenary,an ESG Ecosystem stage and an ESG Fintech Zone exhibition sh

15、owcasing the ESG ecosystem in Singapore.The gathering in Singapore from 2 to 4 November 2022 brought together thousands of people from around the world finance professionals,technology experts,FinTech entrepreneurs,policymakers,regulators,academics,inventors,and many more to address some of humanity

16、s most significant issues.This publication surveys McKinsey&Companys perspectives on how FinTech can contribute to building a sustainable global system,drawing on the views offered by speakers during SFF 2022,including respected leaders from financial institutions,financial regulators,technology pro

17、viders,FinTech founders,and non-governmental organizations.This publication is jointly produced by McKinsey&Company,the Monetary Authority of Singapore(MAS),and Elevandi.McKinsey has helped MAS build the sustainable finance ecosystem in Singapore and collaborated on a series of publications and conf

18、erences.The authors and their teams would like to thank all the SFF 2022 contributors for their insights.We hope this publication forms a springboard for FinTech and sustainability practitioners to find FinTech solutions to todays sustainability challenges and take definitive steps toward implementi

19、ng these solutions across the financial sector.We can drive real change with the FinTech and sustainability communities coming together.ForewordSopnendu Mohanty Chief FinTech Officer,Monetary Authority of Singapore Chairman of the Board,ElevandiJoydeep Sengupta Senior Partner McKinsey&Company1Enlist

20、ing FinTech to help create a sustainable futureSnapshots from the Singapore FinTech Festival 20222Enlisting FinTech to help create a sustainable future2Enlisting FinTech to help create a sustainable future“The jury has reached a verdict.And it is damning.This report of the IPCC is a litany of broken

21、 climate promises.It is a file of shame,cataloguing the empty pledges that put us firmly on track towards an unliveable world.”Antonio GuterresUnited Nations Secretary General at the launch of the IPCC Report,April 2022“Real success can only come if there is a change in our societies and in our econ

22、omics and in our politics.”Sir David AttenboroughEnglish broadcaster,biologist and natural historian“This is a race for our lives.We need all instruments of public policy to accelerate action we have to think of central banks and financial regulators as part of public policy.”Tharman ShanmugaratnamS

23、enior Minister and Coordinating Minister for Social Policies,Singapore and Chairman of the Monetary Authority of Singapore at the Transition Finance Towards Net Zero Conference,October 2022“Earth is now our only shareholder.Instead of going public,you could say were going purpose.”Yvon ChouinardAmer

24、ican environmentalist,philanthropist and founder of Patagonia“When you buy a green product,youre saying to the companies that make these products:Theres demand for these items.”Bill GatesAmerican business magnate,investor,philanthropist,author and co-founder of Microsoft“The most important thing for

25、 the energy transition is to obtain a just and affordable transition”Airlangga HartartoCoordinating Minister for Economic Affairs,Indonesia at the Indonesia-Singapore Business Forum,June 2022“The net zero transition wont mean flipping a green switch or investing only in companies that are already gr

26、een.Transition means transition.Financial institutions must go where the emissions are and back companies to transform their businesses for a net zero world.”Mark CarneyUnited Nations Special Envoy for Climate Action and Finance and Former governor of Bank of England“The biggest threat to our planet

27、 is the belief that somebody else will take care of it.”Sir Robert SwanOfficer of the Order of the British Empire,Polar explorer and founder of the 2041 Foundation for the Preservation of AntarcticaLeading voices on the need for a sustainable future11 Quotes as presented by Eric Lim,Chief Sustainabi

28、lity Officer of UOB at the SFF 2022 Global Plenary Session3Enlisting FinTech to help create a sustainable futureAfter decades of activists,institutions,and scattered politicians raising the alarm over climate change,the world is finally catching on.Extreme weather and other catastrophic climate even

29、ts,such as visibly diminishing ice caps,have drawn greater attention to this growing problem.Yet as nations rush to make promises to curb greenhouse gas emissions and decarbonize the economy,these pledges are made against a background of past failures to honor such commitments.1 Valerie Volvici,“Som

30、e countries have resisted 1.5C goal in COP27 text,US says”,Reuters,November 2022This must change.While the effort will require participation for all sectors,the FinTech industry can play an important role in mustering resources and leading the way to creating a sustainable world.With its twin-edged

31、sword of financial and technical prowess,the industry can help move capital to where it can be most useful,while at the same time supporting the technical innovations needed for true change.The industrys importance was a central theme in the Singapore FinTech Festival(SFF)2022 held in November,where

32、 leaders addressed the challenges from multiple perspectives.Global action“a litany of broken climate promises”When the United Nations released an ominous assessment early in 2022 on international efforts to halt climate change,UN Secretary General Antnio Guterres famously called the report“a litany

33、 of broken climate promises that put us firmly on track towards an unlivable world.”The UN and other international bodies had been raising warnings about climate change since at least the mid-1990s,and almost three decades later there is little progress to show.Yet in recent years more and more voic

34、es have sounded in support of making substantial efforts.In November 2021,business leaders from around the globe attending the UN Climate Change Conference pledged to work toward net zero greenhouse gas emissions by 2050.The conference known as COP26 because it was the 26th in a series embraced the

35、target of keeping global warming to below 1.5 degree Celsius.Just a year later,at COP27,mentioning of this global goal in the final statement met with resistance,and the target was dismissed by some as unrealistic.1 Enlisting FinTech to help create a sustainable future“We are trying to pull off the

36、largest industrial revolution known to man,estimated to be worth$100 trillion in investments all within the next 28 years.”-Eric Lim,Chief Sustainability Officer for United Overseas Bank4Enlisting FinTech to help create a sustainable futureIn opening SFF 2022,Eric Lim,Chief Sustainability Officer fo

37、r United Overseas Bank,recapped the promises made at COP26.He noted that more than 100 countries and about a third of worlds largest companies have signed onto the goals,and financing for sustainability projects had grown more than 100-fold over the previous decade.“This sounds great,and surely were

38、 in great shape,”Lim said,before reminding the conference of the worlds disappointing track record.“We are trying to pull off the largest industrial revolution known to man,estimated to be worth$100 trillion in investments all within the next 28 years.And were going to need all of our ecosystem part

39、ners to be pulling in the same direction in a coordinated manner.”The difficulties of overcoming inertia in the battle to deliver sustainability were exacerbated in 2022 when global events erected new obstacles.Beyond the immediate tragedy of the war in Ukraine following the Russian invasion in Febr

40、uary,this event was a catalyst for great uncertainty,especially around energy security.Countries put renewed emphasis on coal-generated electricity as natural gas supplies were threatened.Led by rising oil prices,inflation was resurgent and the possibility of a global recession loomed by the end of

41、the year.Managing the global response to the war also sucked away substantial political energy that might have otherwise been directed toward climate change.2 Noah Browning,“Energy crisis sparked by Ukraine war to speed up green transition-IEA”,Reuters,Oct.27,2022.The impact was not uniformly negati

42、ve,however.The sudden threat to energy security re-ignited efforts to move away from fossil fuels.In October,the International Energy Agency estimated the annual global investment in clean energy will increase by about 50 percent by 2030 to about$2 trillion,largely as a result of disrupted energy fl

43、ows from Russia.2“Energy markets and policies have changed as a result of Russias invasion of Ukraine,not just for the time being,but for decades to come,”its executive director,Fatih Birol,reported.At COP27 in Egypt,the impact of the war added a new dimension to efforts to combat climate change.Alo

44、ng with the moving toward a net zero global economy,the delegates championed energy resilience,a faster move toward secure,clean,and affordable energy.Insights from the opening note of SFF2022 by Eric Lim5Enlisting FinTech to help create a sustainable futureCapital mobilization,financial innovation

45、crucialThe move to a net zero global economy by 2050 will require the greatest reallocation of capital since World War II coupled with a massive influx of financial innovation.To date,financial mobilization toward this aspiration pales in comparison to the amount ultimately needed.In its January 202

46、2 report,the McKinsey Global Institute(MGI)calculated that capital spending needed for the transition would total$275 trillion between 2026 and 2050 or about$9.2 trillion a year(Exhibit 1).The need represents an average increase in annual spending of about$3.5 trillion or,for illustration,an amount

47、equal to about half the annual global corporate profits.In addition,the bulk of this spending would be needed in the early years of this period,going from about 6.8 percent of global GDP currently to almost 9 percent between 2026 and 2030,before tapering off again.While the funding needed is signifi

48、cant,many of these investments would generate returns and would not be mere costs.In addition,innovation could bring down the costs of required technologies faster than expected.FinTech could play a significant role in helping to mobilize the capital required to create global sustainability.So far,o

49、nly a very small portion of the total need is covered through financing.In recent years financing for projects targeting reduced emissions grew,but remained well short of the total needs.6Enlisting FinTech to help create a sustainable futureNew spendingCurrent spending$9.2$3.5$2.7$2.0$1.0Exhibit 1:C

50、apital needs for transition to net zeroNew spending on low-emissions assets and enabling infrastructureTotal annual spending in the Net Zero scenario Spending reallocated from high-to low-emissions assetsContinued spending on low-emissions assets and enabling infrastructure Continued spending onhigh

51、-emissions assets($trillion)Source:McKinsey Global Institute,“The net-zero transition:What it would cost,what it could bring”,McKinsey,2022.Based on the Network for Greening the Financial System(NGFS)Net Zero 2050 scenario,a hypothetical scenario and not a projection.7Enlisting FinTech to help creat

52、e a sustainable futureComplex trade-offs and opportunities for innovators The need for substantial investment in sustainability presents complex trade-offs even for companies with the best intentions.Those that can find an appropriate balance between competing forces,however,have the chance to capit

53、alize on the many opportunities the transition presents.Any change brings with it some level of risk,and in the march toward sustainability these risks present what some might see as an intractable dilemma.On the one hand,senior executives are faced with increasing pressure including from their pers

54、onal aspirations to become net zero or carbon neutral,and on the other they are called upon to maintain resilient,profitable businesses,particularly in times of volatility.They may also face the choice between moving quickly and risk that the needed resources,whether materials,equipment,or talent la

55、g demand.And now,the geopolitical shocks of 2022 might tempt many to set aside sustainability goals at least temporarily in favor of tried-and-true fossil fuel-based operations,for example stopping or delaying investment in renewable energy sources.This might especially be true for the manufacturing

56、,transportation,and energy sectors.Our view,however is that such an approach is a false trade-off.Companies can be flexible and maintain a long-term focus on sustainability while creating the necessary resilience to withstand shocks.Indeed,continued efforts toward sustainability can build energy ind

57、ependence and add substantially to resilience.“We have to balance the speed of execution,the cost of it,and other aspects such as energy stability,”Kattiya Indaravijaya,CEO of Thailands Kasikornbank,told SFF 2022 attendees.“If we want to accelerate the reduction of coal consumption,we have to be sur

58、e that other types of energy are available and sufficient to support our business operations.There will always be trade-off between transition costs and speed or the availability of raw materials.”The dual focus on resilience and net zero will require companies to explore materials transition and ot

59、her green-business approaches early to secure access to the most promising innovations.While the risk is generally higher for first-movers,the rewards are also proportionately higher.For example,early investors can benefit from policy incentives,skilled talent attracted to cutting-edge employers,par

60、tners who are equally willing to explore the potential,and securing a place in emerging value chains.Amid this difficult balancing act,responsive companies will discover massive opportunities.Overall,McKinsey analysis of 11 industrial categories globally has shown that green offerings could generate

61、 more than$12 trillion of annual sales by 2030(Exhibit 2).Reaching this potential will require substantial investment in a wide range of sustainable goods and services,including materials,climate technology,and energy.“We have to have a backup plan to balance the speed of execution,the cost of it,an

62、d other aspects such as energy stability,”-Kattiya Indaravijaya,CEO of Kasikornbank8Enlisting FinTech to help create a sustainable futureExhibit 2:Potential value pools exceed$12 trillionAddressable market size in 2030,selected categories,$billion250 to300Industrials Steel Aluminum Cement Mining Che

63、micals100 to200Carbon management Carbon capture,utilization,and storage Carbon ofset markets Carbon tracking and measurement300 to400Waste Enablers of materials reuse Industrial-and mature-materials processing Materials-processing innovation650 to1,150Oil,gas,and fuels Electrification of upstream an

64、d downstream Efciency improvements Direct-emissions elimination Sustainable fuels850 to1,200Consumer Consumer electronics Sustainable packaging Sustainable fashion1,000 to1,500Power Renewable-power generation Grid modernization and resiliency Flexibility and energy storage Power system tech and anal

65、ytics Decommissioning and thermal conversion2,300 to 2,700Transport Electrification Micromobility Infrastructure for electric vehicles Sustainable aviation650 to850Hydrogen Production Transmission End use550 to1,200Agriculture and land use Land and forest management Agricultural production Alternati

66、ve proteins Food waste reduction Sustainable agricultural inputs Sustainable agricultural equipment1,100 to1,200Water Municipal water supply Industrial water supply1,300 to1,800Buildings Sustainable design,engineering,and construction advisory Green building materials equipment Green building tech/o

67、perationsSource:Bob Sternfels et al.,“A devilish duality:How CEOs can square resilience with net-zero promises”,McKinsey,2022.9Enlisting FinTech to help create a sustainable futureMultiple roles for FinTechs in the climate transitionFintech companies can play multiple roles in helping these sectors

68、reach this potential.Along with being instrumental in accelerating the movement of capital to these areas,Fintech companies technological know-how can be pivotal in developing and funding the innovation needed to find solutions around carbon capture,protection of natural ecosystems,and other sustain

69、ability themes.Companies seeking to capture these profitable opportunities will need their own innovative new business models.At SFF 2022,Jonathan Larsen,Chief Innovation Officer at Chinese insurer Ping An,described the companys effort to pioneer personal carbon accounting.Essentially,Ping An offers

70、 its 110 million credit and debit card holders the option to create personal carbon accounts,which allow them to track their own carbon footprint based on purchasing patterns.Larsen said personal carbon accounts are just one of many business opportunities FinTech can explore around sustainability.Ra

71、ting services provide another promising avenue.“This whole space of climate change ratings creates profitable opportunities for service providers that are able to gather the right data,provide the right structure.and create the right alignment with government,with supranationals,”he explained.An add

72、itional role for FinTechs will be to educate clients on the implications of the climate transition for their businesses and to help them move forward.Indaravijaya at Kasikornbank observed that some clients have only limited awareness of how climate change or environment,social and governance(ESG)con

73、cerns will impact their business or create new opportunities.“We need to heavily and consistently communicate and also provide financial incentives,for example lower interest rates for those who want to change,”she said.Because these seismic changes foretell continuous innovation throughout the fina

74、ncial services value chain,weve seen an increasing focus on how FinTech can help meet sustainability objectives.So far,nimble companies have the edge.In many markets,start-ups have been the first to develop climate-tech businesses,for instance around renewable energy and electric vehicles,while incu

75、mbents have been slower to adapt.The transition is still nascent,however,and established companies have ample room to break into climate-technology domains if they move now.10Enlisting FinTech to help create a sustainable futureThe FinTech industry has had a solid start in focusing on work that cont

76、ributes to sustainability.3 McKinsey Global Retail Banking Survey 2021In 2021,funding in FinTechs for Good(FinTechs that embed an ESG agenda into their core product portfolio,operations and mission)reached about$2.1 billion,primarily in North America and Europe(Exhibit 3).The annual financing levels

77、 almost doubled on average each year from 2017 to 2021.Specific activities in the FinTech industrys effort to support sustainability encompass six identifiable themes:Sustainable everyday banking:Products and services that match customers environmental values,such as rewards for responsible shopping

78、.Impact fundraising:Raising funds for environmental and social causes.ESG intelligence and analytics:Sustainability-related data and analytics,ESG ratings and research services.Impact investing and retirement:Opportunities that generate social and environmental impact along with financial returns.Gr

79、een and accessible financing:Financing for sustainability projects and providing credit access to underserved groups.Carbon tracking and offsetting:Tracking individual and corporate carbon footprints based on financial transactions and identifying ways to offset them.In 2021,the bulk of FinTech fina

80、ncing in this area,just more than 50 percent,went toward sustainable everyday banking,while the greatest growth since 2017 was seen in ESG intelligence and analytics and in carbon tracking and offsetting,both of which more than doubled on average each year over the period.Generational changes will m

81、ake such initiatives even more attractive as a business proposition.Research in 20213 has shown that about a third of the younger generations millennials and generation Z would prefer banks that reinvest their money in ESG-related activities even if it meant no or less financial benefits for them as

82、 customers.These levels were almost three times as high as those of older generations.FinTech has a solid start to closing gap11Enlisting FinTech to help create a sustainable futureFunding in FinTech1 for Good by year and regionEUR mn#of FinTech for Good companies globallyExhibit 3:FinTech for Good

83、financing reaches$2.1 billion in 202020021YTD+68%87%p.a.North AmericaEuropeAsiaLatAmRoW14420181%4%44%33%27%20171711%68%16%15%2,1031%2021YTD71%22%1%4%42220205%4%1%62%28%32120191%55%28%16%1 FinTechs with non-zero funding as of Oct 2021,N=140Source:Dealroom.co,McKinsey

84、Panorama Fintech12Enlisting FinTech to help create a sustainable futureBalancing profitability with social aspirationsCompanies should realize that their considerations must move beyond mere profitability.The larger goal is to create authentic progressive leadership around sustainability themes and

85、finding a balance between delivering to society and generating their own returns.The transition to a net zero world will place uneven burdens across sectors,geographies,communities,and even individuals.For example,a McKinsey study in 2022 found that investment needs will be greater in relation to ec

86、onomic output in regions with relatively low GDP or greater fossil fuel resources than elsewhere(Exhibit 4).World leaders formally acknowledged these disparities at COP27 by agreeing to create a global fund to help developing countries most vulnerable to the effects of global climate change.The acti

87、on underscored that many countries that have contributed the least to the global problem will face the brunt of its impact.The disparities will require companies to consciously value the social good they do along with the economic profit they generate.Progressive leadership means creating significan

88、t and positive change with a consistent and ethical approach.“We want to drive change,to see our children and grandchildren grow up in a world where there is social stability and no clash of classes,”Anthony Tan,Co-Founder&Group CEO,Grab(bottom left),declared at SFF 2022.“How do you do that?By uplif

89、ting the millions of people that we serve.”Tan acknowledged balancing shareholders expectations with social aspirations is difficult and forces companies to create new ways to maintain profitability while improving living standards,reducing poverty,and promoting other social benefits.Through innovat

90、ion,Grab has reduced consumers use of plastic,he noted,and has invested more than$200 million to electrify its fleet.In another example of innovation,long-time sustainability activist Sonam Wangchuk,Founder,Himalayan Institute of Alternatives(bottom right),told the SFF 2022 attendees they need to fo

91、llow an“enlightened middle path of business and impact”to meet ESG challenges.He illustrated the idea by describing the Students Educational and Cultural Movement of Ladakh(SECMOL),which he founded in India in 1988.The enterprise wing of the school has invented products such as carbon-neutral solar

92、heating for buildings and artificial glaciers called Ice Stupa that store stream water for the summer when water can be in short supply.These innovations have generated income that allows the institution to operate without charging tuition fees.13Enlisting FinTech to help create a sustainable future

93、GDP per capita,$thousand Correlation coefcient,r=-0.69Transitionexposure score (0=no exposure,100=fully exposed)HotterSignificantlyhotter andmore humidHotter andmore humidIncreased water stressDiverse climateLower risk Circle size=populationin millionsArchetypeof physical risk 1,20060020090303160402

94、015cBangladeshNigeriaPakistanJapanSaudiArabiaSouth KoreaUnited ArabEmiratesNorwayAustraliaMexicoQatarIndonesiaKenyaIndiaSpainBrazilChinaUnited StatesCanadaFranceGermanyRussiaUnited Kingdom Exhibit 4:There is an uneven distribution of net zero burdenArchetype of physical risk through transition expos

95、ure vs GDP per capita by country(logarithmic scale)Source:McKinsey Global Institute,“The net-zero transition:What it would cost,what it could bring”,McKinsey,2022 Based on the NGFS Net Zero 2050 scenario,a hypothetical scenario and not a projection.14Enlisting FinTech to help create a sustainable fu

96、tureFocus on substance to avoid appearance of greenwashingAs sustainability efforts proliferate,companies must emphasize substance over hype.Activist groups have long viewed corporate responsibility programs with skepticism,and,for many,efforts such as Fintech for Good could be perceived as indulgin

97、g in corporate greenwashing.Detractors are wary of programs that appear good for the brand,but are not core to corporate strategy.Stuart Kirk,a financial commentator and former Global Head of Responsible Investments at HSBC Asset Management(bottom left),warned the conference against“mis-selling,”whi

98、ch he defined as products and services,especially sustainability-related ones,not performing as advertised.“They have very little impact,and most people would be buying them expecting a certain thing to happen and they dont,”he said.“So,there is a mis-selling element to this.”Tariq Fancy,Founder of

99、the Rumie Initiative(bottom right),a Canadian agency that promotes digital learning in cut-off areas,seconded the caution.Companies that build ESG solutions have extraordinary space to innovate,but must also self-police to protect against the appearance of greenwashing,he told SFF 2022.“Build stuff

100、that has real impact.”-Tariq Fancy,Founder of the Rumie Initiative15Enlisting FinTech to help create a sustainable futureData collection and analysis is a crucial factor in whether FinTech innovation can successfully support sustainability goals.Data is necessary to make informed decisions,evaluate

101、market participants,and assess the success or failures of initiatives.Yet good data remains a scarce commodity.4 Lindsay Delevingne et al.,“The ESG premium:New perspectives on value and performance”,McKinsey,February,2020.A 2020 report found that lack of proper data figured in two of the top three r

102、easons companies didnt assess ESG programs when judging competitors,suppliers,or capital programs(Exhibit 5).4 The survey of investment managers and executives found that both groups ranked insufficient available data as the biggest reason for not taking ESG efforts into consideration.A lack of expe

103、rtise to analyze data was ranked second by investors and third by executives.FinTech is ideally placed to support the broad efforts needed to collate the data that will make ESG criteria part of financial and corporate decisions.Such information is critical in tracking greenhouse gas emissions and m

104、easuring the impact of measures to reduce them,among other core sustainability goals.“We need system change,and it must be data-and behavior-led,”Antony Ruddenklau,Partner and Global Head of FinTech at KPMG told SFF 2022,lamenting that there is almost no data available to support the change.“This is

105、 where FinTech comes in.FinTech enterprises are nimble.Theyre born in the cloud with data as a product.They can support fast transitions and help larger organizations to innovate.”Data remains crucial in supporting innovation16Enlisting FinTech to help create a sustainable futureExhibit 5:Data is a

106、significant problem in judging ESG efortsReasons ESG considerations are not fully included in assessments of competitors,suppliers,and/or capital projects,%of respondents16258Available data are insufcientContributions are too indirect to valueExpertise to analyze this type of data isnt availableCont

107、ributions are too small to measureContributions are too long term to valueFiduciary responsibility doesnt allow full inclusion of these considerations475038510ExecutivesInvestment professionals1 Question was asked only of executives who said their organizations somewhat or do not include

108、environmental,social,and governance considerations in their assessments of competitors,suppliers,and/or major capital projects and of investment professionals who said they do not include ESG considerations in their assessments.Respondents who said“other”or“dont know”are not shown.For executives,n=4

109、14;for investment professionals,n=110.Source:Lindsay Delevingne et al.,“The ESG premium:New perspectives on value and performance”,McKinsey,February,2020.17Enlisting FinTech to help create a sustainable futureAvailable data fragmented,hard to compareThe lack of trusted and usable data is not necessa

110、ry because of a lack of trying.There are many groups that attempt to rank companies by ESG criteria,but the market remains very fragmented,creating the potential for conflicting assessments.In addition,there are serious limitations in available ESG data that make comparisons difficult.Among the most

111、 important are:Providers can conflate different underlying metrics to aggregate their ratings.Providers use inconsistent methodology to impute company metrics.Benchmarks based on ratings require careful peer group selection for valid comparisons.In addition,legacy IT systems are often not equipped t

112、o produce appropriate ESG data or deliver it in a useful manner.Collecting ESG data is often done manually and is tedious and costly.This challenge has prompted Singapore to include the creation of a trusted data stream as one of five core objectives in its FinTech development plan.The Monetary Auth

113、ority of Singapore(MAS)is working with the financial industry on Project Greenpoint,which aims to streamline the collection,access,and use of climate and sustainability data.“Good data is foundational to driving the green and transition-finance agenda,”Ravi Menon,Managing Director of MAS,said at SFF

114、 2022.“Quality data is key in the fight against greenwashing and enabling stakeholders to make well informed ESG investment decisions.”For optimal use,financial institutions and corporates need reliable data on their customers and suppliers,particularly on their carbon footprints and on the efforts

115、they are making to meet transition targets.Data on climate-related risks is also helps to assess the vulnerability of physical assets.“Good data is foundational to driving the green and transition-finance agenda.”-Ravi Menon,Managing Director of MAS18Enlisting FinTech to help create a sustainable fu

116、tureAnother obstacle in ESG data is the long time frame it needs to cover.A successful climate transition will be measured over decades,not months or even years.At many companies,CEOs and chief sustainability officers will come and go before any true successes can be celebrated.“Its about preserving

117、 the memory of whats been started and what needs to be completed over a number of years,”observed Maya Hari CEO of Terrascope,a Singapore-based climate technology start-up.Helge Muenkel,Chief Sustainability Officer for DBS Bank,added at the conference that data is critical for financial institutions

118、 across two dimensions.“Looking inward,we need better data because we need to make informed decisions on how to allocate capital,”he said.“The outward-looking part is how do we use data and new analytical tools in our client engagement over decarbonization.”19Enlisting FinTech to help create a susta

119、inable futureStandardization essential,but faces hurdlesMaking data more available is only one part of the solution.Companies,industries,and countries have different ways of gathering,storing,and presenting data,creating a hodge-podge of information that cannot be easily brought to together sensibly

120、.Uniform reporting standards are needed to enable legitimate comparison and help companies and financial institutions identify prime investment opportunities.A promising starting point would be for companies to work to create some level of standardization within their own business ecosystem.Manjula

121、Lee,Founder and CEO of World Wide Generation,Creator of the G17Eco platform(bottom left),explained at SFF 2022 how her organization brought together various ESG standards and frameworks into a single digital taxonomy and is working with Singapores exchange operator,SGX,to apply the platform to all l

122、isted companies,as well as the wider Singapore ecosystem of private companies and small and mid-sized enterprises(SMEs).“We all have to work together.We all need to be on one interoperable system,”she said.“We all need to be looking at the same golden source of trusted and comparable,verified data.”

123、The question also arises of whether all data,even standardized data,should be evaluated equally.Are differences between regions or industries relevant when assessing a companys sustainability credentials?“We need greater comparability.We need to create a greater mechanism and standard,”Mark Fitzpatr

124、ick,CEO at Prudential(bottom right)said at SFF 2022.“But the standard cannot be the same throughout the world.What is needed in Singapore may be different in Thailand,(etcetera).There needs to be a localization of that data,that is important to guide investors.”Also,SMEs may be in danger of falling

125、through the cracks.SMEs account for about 70 percent of global employment and economic output,but partly because individually they have less resources than large companies to invest in data tools they can easily fall into an information void,making decisions around sustainability more difficult.FinT

126、ech can be crucial in helping SMEs overcome this hurdle by creating ways to,for instance,generate valid data using existing transaction or payment reporting systems or the inputs the companies consume.Wu Shiwei,Chief Technology Officer at Huawei Cloud APAC,told the SFF 2022 gathering that FinTech ca

127、n help SMEs become more sustainable by reducing the costs of reporting through automation of other technologies.“If SMEs are running their business processes on a standard platform,”he said,“you can actually analyze every step of the business process and set up benchmarks to compare their standards

128、to best practice.In that way,resource requirements will be much less compared to manual verification by humans.”20Enlisting FinTech to help create a sustainable futureBlockchain technology can contribute to data integrityGiven that ESG data is fundamental to sustainability investment and lending dec

129、isions,there must be a way to deconstruct the data and verify its integrity.Otherwise,decisions based on this data have the risk of being ill-informed and companies remain open to accusations of greenwashing.Blockchain technology could address this challenge.At SFF 2022,John Lee,Managing Director an

130、d Global Lead of Digital Assets for Accenture,used the example of green bonds.These financial instruments are marketed to investors interested in sustainability,but are frequently criticized for not being as friendly to the environment as touted.Using blockchain,traceable data can be embedded in gre

131、en bond issues that corroborates where the funding went.“With this,youve already radically increased visibility and transparency,and by definition reduced the cost,”Lee said.Voluntary carbon markets can follow a similar path.Currently,verifying that the benefits of a carbon project are in line with

132、its claims can difficult.Without technological interventions that manage the costs of producing traceable data,the commercial viability of laudable projects could be harmed.Again,blockchain technology can help here.21Enlisting FinTech to help create a sustainable futureThe Climate Action Data Trust,

133、an initiative by the World Bank,the International Emissions Trading Association,and the Singapore government,is testing this idea.The project will use blockchain technology to set up a common registry for carbon projects.Gene Hoffman,Director,COO and President of Chia Network Inc(bottom left),which

134、is providing the blockchain technology for the project,promised at SFF 2022,“The core value that blockchain brings is immutability of data,which helps build markets really well.”He said his company is exploring similar initiatives that could create market instruments with embedded standards that can

135、 be used globally.Of course,blockchain,the technology behind cryptocurrencies,has also faced immense criticism for its own electricity use,an artifact of how the system generally stored and verified data.At SFF 2022,Vitalik Buterin,Co-founder of Ethereum(bottom right),the second largest cryptocurren

136、cy behind Bitcoin,said technology is helping the industry greatly reduce its own carbon footprint.Because of the need for massive,24-hour-a-day computing power,the algorithm that was the industry standard,known as Proof of Work,had Ethereum consuming as much power as a wealthy country of about 3 mil

137、lion people.In a changeover on September 17,2022,known to the industry as“The Merge,”Ethereum switched to a new algorithm,Proof of Stake,which reduced its power consumption by almost 100 percent,he said,adding,“Now,Ethereum consumes less energy than basically most mainstream,even centralized web ser

138、vices that everyone uses today.”22Enlisting FinTech to help create a sustainable futureDeploying AI for data verifiability While blockchain may be able to attest to the integrity of the data,it has no means to verify its veracity.“As soon as the blockchain needs to talk to the physical world,youre g

139、oing to introduce another point of uncertainty,”cautioned Staci Warden,CEO of the Algorand Foundation,a blockchain ecosystem.Another modern technology,artificial intelligence(AI),could hold the solution to this challenge.AI and machine learning could be deployed to vouch for the validity of data.The

140、y could seek out and identify data abnormalities that could call into doubt the sustainability claims of particular instruments.“You can only commit to what you can measure,and thats where big data and AI can play a big role,”said Liu Feng Yuan,Business Development Vice President at Aicadium Singapo

141、re(bottom,first on the left).AI can also be used to support third-party verification of environmental commitments.NovA!,an initiative launched by MAS,is designed to help financial institutions use AI to generate verifiable insights on environmental risks,focusing at first on Singapores real estate s

142、ector.NovA!aims to gather water and electricity data to monitor whether consumption levels meet efficiency targets that are part of sustainability-linked loans.“Rather than using paperwork to set efficiency benchmarks,we can work with the national utilities to get account level data to enable sector

143、al or peer comparisons,and then use a verifiable platform like NovA!to monitor performance”,said Liu,who is working with MAS on the project.Another AI application could use satellite data to help agribusinesses track and verify efforts to reduce deforestation,providing vital evidence for NGOs,banks,

144、and companies.23Enlisting FinTech to help create a sustainable futureEncouraged at least in part by increased concern for climate change,regulators around the world are taking a keen interest in sustainability claims by corporations,particularly their reporting activities.In mid-2022,the US Securiti

145、es and Exchange Commission proposed new rules compelling companies to enhance and standardize sustainability disclosures,as well as mandating new climate risk disclosures.In Europe,the Corporate Sustainability Reporting Directive similarly expanded reporting requirements starting with the 2023 fisca

146、l year.Regulators efforts welcomedThe various directives make clear regulators intentions to make sustainability a core priority for businesses.Ruddenklau at KPMG said this regulatory shift is a reason why the bank expects that the global ESG FinTech market will grow from about$21 billion in 2022 to

147、 more than$160 billion in five years.“Why are we so bullish?”he asked.“Because there are regulatory tailwinds like no other system change that were seeing currently.This is probably the largest change weve seen since International Financial Reporting Standards were introduced 20 years ago.”The force

148、d shift will not be easy for many companies.Injeti Srinivas,Chair of the International Financial Services Centres Authority in India,told the SFF 2022 gathering that the regulatory attention“will require a lot of commitment,accountability and genuine team spirit to integrate ESG objectives with busi

149、ness objectives.”Public sector as regulator and partner24Enlisting FinTech to help create a sustainable futureInvestors will also be caught up in the scramble to oversee ESG claims and disclosures more diligently.Nikhil Rathi,Chief Executive of the UK Financial Conduct Authority,said at SFF 2022,“A

150、core part of the challenge is enabling and encouraging investors to perform well as stewards of their companies as effectively as possible.That means interacting through AGMs annual general meetings in a more open and accessible way,rapid voting disclosures after meetings,and increasingly investment

151、 votes on transition plans.”Rathi also noted that because data is an increasingly important part of the value chain for financial companies,financial regulators have had to become data regulators as well.Unlike in other areas,however,companies seem to welcome increased oversight of ESG data,he said,

152、adding,“Industry is very keen for ESG data providers to become regulated so as to create some common benchmarks.”Increased regulation also generates greater complexity for financial companies,especially those with multi-national operations.Benchmarks used by various jurisdictions compete for promine

153、nce and are sometimes contradictory.An international agreement may be needed similar to the Basel Accords,which unified global regulation of capital,market,and operational risk.Public-private partnerships can support ESG data sharingThe public sector must also partner with private companies to pursu

154、e the common objective of compiling credible data on ESG activities.The scale and range of challenges in the effort put it beyond the means of private resources alone.The NovA!pilot in accessing water and electricity usage data in Singapore is a clear example of how public-private partnerships might

155、 work in this area.Where possible,the aim should be to create a common and clean set of verifiable data that is broadly available.Individual companies would be spared the repetitive and costly task of answering similar questions from different entities and partners,and data presented would be unifor

156、m to all who need it.For such public-private partnerships to succeed,incentives must be aligned.Companies supplying the data must have some benefits proportionate to their efforts in gathering and submitting the data.25Enlisting FinTech to help create a sustainable futureConclusionDespite good inten

157、tions from public and corporate leaders over many years,there is undoubtedly great pessimism around societys willingness and ability to meet the climate change challenge.Given the worlds track record to date,this pessimism in not entirely unjustified.The cycle of neglected commitments needs to be br

158、oken,and the FinTech industry can be a major catalyst.The industry sits at a critical juncture of finance and technology and is ideally placed to help mobilize the massive capital needed to fulfill sustainability goals.It can also provide much needed support for innovative ideas to reduce greenhouse

159、 gas emissions,build renewable energy sources,and other vital efforts.Having reliable,verifiable data will significantly increase the likelihood of attaining these aspirations and must be addressed as quickly as possible.Two of the newest technologies blockchain and artificial intelligence could be

160、instrumental in meeting this challenge.Along with initiatives within the industry,partnerships with the public sector will be essential for success.Climate change is the most frightful challenge society has faced in human memory.Inertia that leads to inaction must be broken quickly,and the weight of

161、 FinTech would make a mighty sledgehammer.26Enlisting FinTech to help create a sustainable futureRelated readingThe net-zero transition:What it would cost,what it could bring This report looks at the economic transformation that a transition to net zero emissions would bring,a transformation that wo

162、uld affect all countries and all sectors of the economy,either directly or indirectly.It estimates the changes in demand,capital spending,costs,and jobs to 2050 for sectors that produce about 85 percent of overall emissions and assesses economic shifts for 69 countries.Shapers of sustainability How

163、can countries and institutions accelerate the mobilization of capital to close the funding gap required for the transition?McKinsey convenes leading experts across the field to answer this crucial question as part of McKinseys Shapers of Sustainability interview series.Accelerating toward net zero:T

164、he green business building opportunitySurging demand for zero-carbon technologies,materials,and services gives companies opportunities to build new green businesses.Leaders that move quickly could see exponential growth.How to make ESG realWhile ESG is likely to evolve both in substance and name in

165、the coming years,its underlying impulse is here to stay.Heres how companies can take a more systematic and rewarding approach to ESG.Innovate to net zeroAchieving net zero emissions will involve a significant economic transformation.Developing,scaling,and deploying climate technologies will be criti

166、cal to keep global warming to less than 1.5 degrees Celsius.The global decarbonization transition will open new markets and imperil others.We explore how businesses that can innovate quickly and collaborate across value chains will be able to take advantage of enormous green growth opportunities.Fin

167、tech micrositeA collection of articles on the disruptive technologies driving start-ups and revolutionizing banking,payments,and insurance.A devilish duality:How CEOs can square resilience with net zero promisesAmid turbulence on the path to net zero,five actions can help leaders be much nimbler and

168、 balance resilience with an energy future that is secure,affordable,and clean.January 2022ReportThe net-zero transitionWhat it would cost,what it could bring McKinsey Global Institute in collaboration with McKinsey Sustainability and McKinseys Global Energy&Materials and Advanced Industries Practice

169、sWhile ESG is likely to evolve both in substance and name in the coming years,its underlying impulse is here to stay.Heres how companies can take a more systematic and rewarding approach to ESG.by Lucy Prez,Vivian Hunt,Hamid Samandari,Robin Nuttall,and Donatela BelloneHow to make ESG real August 202

170、2The how of a companys environmental,social,and governance(ESG)proposition starts with recognizing what companies should be solving for:maintaining and reinforcing their social license to operate,in the face of rising externalities.Rising scrutiny of how companies address ESG means that a robust app

171、roach is more critical than ever,irrespective of whatever name one may choose to give to the attempt to address these externalities,whatever contours one may define for them at a given point,and whatever organizational or governance construct one may put in place for them.Indeed,we believe one may b

172、e agnostic to the term ESG but not to its underlying concerns.1Not all aspects of“E,”“S,”and“G,”however,are priorities for all companies,and it is unrealistic to expect that companies do not have to make hard trade-offs within and among ESG dimensions,or that they can lead on every topic.It is there

173、fore instructive to observe companies that approach ESG in a rigorous,strategy-driven,socially attuned way.We call these organizations“forward-looking companies.”They make ESG intrinsic to their strategy by defining,implementing,and refining a carefully constructed portfolio of ESG initiatives that

174、connect to the core of what they do.Forward-looking companies also contribute to a competitive landscape where good corporate citizenship is marshaled against existential challenges,not leastbut not onlyclimate change.When a company determines the dimensions of ESG where it wishes to be good and whe

175、re it wishes to be excellent,it is making important decisions,with broader second-and third-order consequences.Forward-looking companies approach ESG decisions by seeking to gain a deep,evidence-based understanding of their own business and its broader potential effects.Since by now every major comp

176、any has begun to embark on an ESG journey,and many have significant programs already under way,it is helpful to 1 These issues are addressed in detail in the accompanying article,“Does ESG really matterand why?,”by Lucy Prez,Vivian Hunt,Hamid Samandari,Robin Nuttall,and Krysta Biniek,McKinsey Quarte

177、rly,August 10,2022.Amid turbulence on the path to net zero,leaders will have to be much nimbler to balance resilience with an energy future that is secure,affordable,and clean.Five actions can help.by Bob Sternfels,Anna Moore,Daniel Pacthod,and Humayun Tai A devilish duality:How CEOs can square resi

178、lience with net-zero promises What a difference a year makes.In November 2021,business leaders showed up in force in Glasgow at the UN Climate Change Conference(COP26),pledging to take on the challenge of reaching net-zero greenhouse-gas-emission goals by 2050.While no one believed that the path to

179、net zero would suddenly become easy,commitments made to target nearly 90 percent of CO2 emissions for reduction signaled that the private sector was truly engaged.Then major new headwinds began swirling:surging inflation,war in Europe,energy insecurity,and a potential global recession.Still,governme

180、nts pressed ahead,passing major climate legislation packages in Europe and the United States.More than 3,000 companies have made commitments on net-zero pathways.At the time of COP26,McKinsey released a perspective on the requirements needed to secure a net-zero carbon emission transition.1 It was c

181、lear,given the challenges to deploying capital at scale,managing economic dislocations,and scaling up supply chains and infrastructure,that the path would not be linear and would include slowdowns and backstepping.Ultimately,sustainable systems are more value creating than traditional ones.But count

182、ries and companies must balance trade-offs among net-zero commitments,affordability for citizens,and security of energy and materials supply.As disruptions have intensified,the moment confronts CEOsan organizations ultimate integratorwith a devilish duality.As net zero has become an organizing princ

183、iple for business,executives are on the spot to lay out credibly how they will deliver a transition to net zero while building and reinforcing resilience against the certain volatility of ongoing economic and political shocks.The zigs and zags of present conditions will tempt some October 20221 “Sol

184、ving the net-zero equation:Nine requirements for a more orderly transition,”McKinsey,October 27,2021.Sustainability Practice and Leap by McKinseyAccelerating toward net zero:The green business building opportunitySurging demand for zero-carbon technologies,materials,and services gives companies oppo

185、rtunities to build new green businesses.Leaders that move quickly could see exponential growth.June 2022 Ko Hong-Wei/EyeEm/Getty Imagesby Rob Bland,Anna Granskog,and Tomas NauclrMcKinsey has published extensively on sustainability,financial technology,as well as the intersection of the two.For more on these topics,refer to the selection of publications below.27Enlisting FinTech to help create a sustainable future