How Technology and Finance Can Work Together to Create a Better Society and Better Planet
At the end of the last decade, Jamie Dimon presented the commitment of major American companies to focus on stakeholder capitalism. What is this and is it real?
It was October 2019, and as chair of the business roundtable, the world’s most valuable bank leader, Jamie Dimon of JP Morgan Chase, gathered nearly 200 signatures from CEOs of America’s largest corporations. who claimed that the return to stakeholders is now like, if not more important than returning to the shareholder. It was an innovative moment, but difficult to apply to reality. Too often, the pressure of return on capital, quarterly results, bonuses, and dividends is more important to our agendas than caring for our staff, customers, and community. But that doesn’t have to be the case.
We live in a world where technology is solving so many problems that the question arises: how can we use technology to solve the problems of stakeholders? Likewise, we live in a world where finance directs the future through its investments, which raises a second question: how can we use finance to lead a better future? In fact, most importantly, how can we use finance and technology together to build a better future for society and the planet?
This is a question that comes to the fore as we see so much activism against business and commerce on the part of our stakeholders. Greta Thunberg, Extinction Rebellion, Occupy Wall Street and more are the consumer activists who attack the ethics and morals of our organizations. More importantly, investors and shareholder activists, such as Follow This, say they are as crazy as hell and will not stand it any longer. And it’s not just a green agenda, it’s an agenda to drive companies to focus on doing good for society and the planet.
At the heart of this mission is finance, as they represent the investment community, but financial companies have focused on shareholder profitability over the past few decades. How can financial companies use technology to drive corporations more ethical and meet the demands of activist consumers and investors?
The answer is that most financial institutions have been reviewing their technology infrastructure for the last decade. They have reduced costs by using cloud computing, the self-service mobile network, and data analytics to automate the service. The result is a reduction in the footprint of branches and moving towards truly digital operations. In other words, like most businesses, they are transformed to be truly digital. It was the last decade. This decade, banks, working with technology companies, will focus on how to use digital transformation to create a better world.
They know that they have to do it for the reasons given – activist movements of customers and shareholders – but more than that, finances are at the heart of the problems we face. Banks finance fossil fuel companies and these are the most damaging to the planet. 71% of all greenhouse gas emissions are generated by just 100 companiesand banks have given these companies $ 4.6 trillion in financing since the Paris Agreement.
People say this needs to change, but not just people. They are also governments, corporations and investors. Interestingly, this move is not new. It started last century, especially with insurers and pension fund managers, but is now gaining momentum and raises an interesting question for banks ’boardrooms: how can we use technology to create a better world and support to the values of our stakeholders?
It is no longer a question of returning shareholders; it is the return of stakeholders. Nor is it just about finance and banking, although this industry is at the heart of this change. These are all industries. How can all industries use technology to support a sustainable future?
The answer seems to be that we can link technologies. We can connect industries through the network. We can use this data to analyze what sustainable activities are like and create a better future for all. For example, there are banks and insurance groups that use technology to make people healthier, to create sustainable agriculture, and to provide financial inclusion for all.
Discovery Group, a South African-based financial company, is using digitalization to create health through wealth. They offer health insurance that discounts premiums if you go to the gym. How do they do it? By offering you a Fitbit bracelet linked to their operations and, if they see you doing the workouts, you reduce your health premiums accordingly.
We have companies like Rabobank in the Netherlands that started as an agricultural bank and now focus on connecting agriculture with financing. Its banking and insurance services link farmers ’fields through technology to monitor soil acidity, weather patterns, growth forecasting and crop yields in real time. This affects real-time premiums and loans. Connecting technology to ground for financial support is an interesting move.
Monzo, one of the largest banks in the UK, started with the mission of providing financing for everyone. Millions of people are excluded from financial services, especially those with mental health problems or homelessness. How is the bank done to a homeless person? Having your character guaranteed by someone who owns a home. The result of these changes is that people who have historically been offline have been back.
There are so many ways in which emerging businesses and financial institutions focus on how to use technology and finance to make the world a better place. That’s why I made the book digital for good, to highlight what is happening.
The book was inspired by stakeholder capitalism as an agenda, and specifically the goals of Alibaba in China, a company I spent a lot of time with in the 2010s. Alibaba’s ultimate goal is to create value for society and help find solutions to society’s challenges.
What better goal could you have?
You might think this is just a marketing statement, but it cuts to the core of the company’s thinking. It is well illustrated by Ant Forest. Ant Forest is the largest online multiplayer (MMO) game in the world, with 600 million people. It started as an idea of a member of the company in 2015, who thought What if we could use finances to change people’s behavior and be greener?
From there, it became a way in which more than 600 million people have planted more than 326 million trees through the Alipay ant forest in just the last five years. How it works is that it controls what you are spending. The more you spend on sustainable activities, such as walking or cycling to work, buying non-plastic products, recycling your waste, etc., the more points you earn. And what do the points do? Trees!
It’s a great program with great results, and if you haven’t reviewed it, you should.
There are many other examples of financial companies that leverage technology to influence corporate and consumer behavior to align with ESG (environmental, social, and governance) principles, but more importantly, to meet their needs of consumers and business activists to see banks behave responsibly.
The good news of all this is that banks, which some accused of losing their moral compass in the 2000s, can regain their mojo and be socially useful. The fact that technology can help in this process and that they both work together – finance and technology – to make the world a better place is a realistic goal is fantastic. It makes me think we can have a better future. We just have to do it.
Written by Chris Skinner.
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