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2019 WILL BE THE YEAR OF ENVIRONMENTAL INVESTMENT

From Brandenburg to Malibu, climate change is making the headlines. Heatwaves, floods, hurricanes, droughts, wildfires across the globe and thousands of humans, animals and trees have disappeared. Despite clear signs from the planet, climate change is not a very manoeuvrable concept for individuals, and it has not caused the political reaction needed to curb this impending disaster.

 

The ever-increasing cost of not managing climate change

Beyond catastrophic headlines, the cost incurred for real estate, supply chains insurance franchises, private citizens and companies have grown exponentially. According to Penn State University’s research, there is an exponential relationship between temperature change and costs incurred to the global economy.

 

 

 

Both the number of extreme weather events and the price tag on the economy has almost doubled in 10 years. (Credit: Statista)

In 2017 in the US alone, natural disasters have cost upward of $330 billion. This is twice the average amount of the previous 10 years.

 

In this context, initiatives to mitigate the consequences of this already palpable change have met with increasing success. Danielle Logue, Professor in Innovation, Entrepreneurship and Strategy, University of Technology Sydney explains:

“Market infrastructure is emerging to support the growth of impact investing globally. It is estimated the impact investing market will be worth between US$650 billion and US$1 trillion in the coming decades.”

The private market is adapting to climate change. Corporate Social Responsibility is growing out of its initial niche to become a self-standing business argument. Companies such as Patagonia, Ikea or Vaude in Germany have made sustainability one of the pillars of their 21st-century business strategy.

Both small-size and larger-scale companies are looking for avenues to support climate action that is in line with their clients and sales strategy. On the other hand, individual and collective projects tackling climate change from all angles are looking for patrons and support from the community. One of the greater bottlenecks of green investment is the gap between these two worlds.

 

What are the real constraints of climate change finance and social impact? (Credit: Plan A)

 

New customers, new goals, new channels

Plan A, a Berlin-based startup, has created a platform for individuals, businesses, NGOs and governments to act together, informed by the facts and the data. This social impact company has developed an algorithm to predict where and how climate change is going to hit the hardest. With this information, this company match-makes the most critical sustainability projects with conscious businesses and a network of environmentally aware supporters. The platform has launched on the 20th of December with 60 climate action projects in 50 countries.

 

2019 will be the year of conscious investment. As the first Superbowl ad teasers seem to confirm, companies are striking the conscious chord of their customers. In a recent survey conducted by Yale Program on Climate Change Communication and the George Mason University Center from Climate Change Communication, a record 72% of Americans declared that climate change was a personal concern of theirs. This represents a 10% increase from the last measure in 2015.

 

https://www.youtube.com/watch?v=UKDA2HVlgko

 

It is only normal then, that environmentally conscious customers, increasingly numerous with each generation, possibly more affluent and representing a new form of business loyalty based on values, become the primary target of brands looking to figure prominently in the post-millennial era. These companies also know that greenwashing, or the “the practice of making an unsubstantiated or misleading claim about the environmental benefits of a product”, can backlash pretty badly. If a company is going to support climate action or another social cause, it will be held accountable to the effects of its campaign. In other words, to look good, you need to do real good.

 

The Importance of being Earnest

Companies like www.plana.earth that are able to curate accurate climate action for positive businesses are already central in the twin fights for customers and against climate change. Some businesses like Apple or Starbucks seem to have gotten sidetracked from their respective approaches to driving social impact and building a regarded as a positive force for change. The days when these companies seemed like a viable option against the “bad” businesses against which they were up against are long gone.

 

Nathan Bonnisseau

With the ushering of digital finance, from mobile payments in East Africa to direct support from social media channels, opportunities arise to invest more and engage more deeply with new partners. Non-governmental Organisations, entrepreneurial changemakers designing solutions perfectly adapted to their needs and settings, or committed consumers who evaluate marketing programs more closely than ever are all examples of the existence and growth of a demographically and culturally dominant conscious market. It’s time this came out in the public: Nice guys are more popular than bad boys.

 

Nathan Bonnisseau is currently Head of Content and Marketing at Plan A, the first data-driven crowdfunding platform in the fight against climate change. He has previously honed his marketer and fundraising skills for French and US education institutions, as well as his content creation game for various publications. The only thing he likes more than cooking good food is eating good food. But if he had to choose, he’d probably bring his guitar over his spatula on a desert island.

 

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THE EVOLUTION OF THE TECH CFO

CFO

Gavin Fallon,General Manager, UK, Nordics & South Africa Board International

 

Chief Financial Officers (CFOs) have traditionally been seen as behind the technological curve – the luddite of the boardroom, too attached to their Excel spreadsheets to move with the times. But the role of the CFO is now shifting and becoming more strategically significant to the business, putting them in the ideal situation to make much needed changes in the boardroom.

Despite many business functions being transformed by data, the boardroom remains a place where paper presentations are annotated around the table and, when it comes to finance, the focus is placed on the traditional statutory profit and loss structure. This may remain useful for reviewing historical performance but provides no insight into what may happen in the future. As global events – from political upheaval to health crises – have an impact on organisations, the ability to react in real-time becomes more important than ever. It is here that CFOs have the opportunity to make seismic changes in their business.

 

Gavin Fallon

CFOs now sit in a unique position

CFOs now sit in a unique position, where the traditional responsibility of keeping an eye on the bottom line is wrapped with analytical and operational knowledge to create a far more strategic role. It is by sitting at this unique crossroads and holding a huge amount of knowledge about every area of the organisation that CFOs have the potential to change many aspects of how the boardroom operates. However, in order to fully realise the potential, CFOs must be empowered to take a digital lead.

A lot of the CFO’s most important work takes place on Excel and Essbase, systems that remain rife with risk. In fact, 56 percent of finance professionals believe the spreadsheets they use in their reporting processes are well-controlled and error free, which may well be why 40 percent also believe their reporting is based on potentially inaccurate information (FSN 2018). Not only prone to human error, spreadsheets are also static and do not allow for real-time forecasting or modelling. While CFOs are well aware of this challenge, the fact they have for too long been tied to legacy systems has led to an unintentional knowledge gap about the technology available to enable them to move away from making decisions based on what happened last year, quarter or week.

 

Seeing the bigger picture

With a greater understanding of the technology available comes an evolution and expansion of the CFO’s role within a business. It is no longer enough to make decisions based on static reporting, focusing on the traditional statutory profit and loss structure. Instead they need to use the tools available to play a strategic role with a keener eye on the future, seeing the bigger picture, anticipating what is next, and having the correct contingency plans in place to mitigate risk.

Technology can provide CFOs with full visibility of the entire company at a single glance, with data at their fingertips enabling them to take into account everything from KPIs to operations, distilling instant insights. This offers a level of clarify that means the answer to ‘what happened’ is obvious, allowing for more attention to be placed on ‘what will happen?’.

Consider a board meeting that is discussing headcount requirements based on the launch of a new product. Using traditional methods, a business may well make presumptions based on experiences when previous launches took place. But since that time, there is likely to have been a whole host of changes, both within the company itself as well as in the wider market – from market conditions for the product to the salary expectations of potential recruits.

The use of such technology, however, does not solely require the buy-in from the CFO, or even the finance function. To fully realise its potential in fundamentally changing how an organisation operates, the value will need to be seen by the entire board to, in effect, create a digital boardroom. While such technology has an impact on all areas of the business, allowing senior leadership to understand the impact of a factory in the supply chain closing, for example, it is the finance function that is best placed to show the value and drive adoption.

 

Primed to integrate the business like never before

The CFO is becoming more strategically important, combining analytical, operational and strategic value into a single role. They are primed to integrate the business like never before, acting as the central thread that ties all aspects of decision-making together in a single, unified process. To do so, requires a radical transformation of their role, as the pioneers of new technology. Already a trusted advisor, CFOs can now elevate their role with the ability to effectively forecast and help spearhead the organisational culture change that is required for the shift in mindset that comes with such digital transformation. To maximise the potential of this unique position, the CFO must be equipped with the technology that provides them with the full visibility of the company and clarity in decision-making they require.

 

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Banking

ADAPT OR LOSE – THE BANKING OF 2030

BANKING

By Frank Zhou, CEO & Founder of Zeux

 

Fintech, the world over, is rapidly expanding with the global value of fintech deals last year coming in at $53.3 billion. It’s no news that this continued growth can – at least, in part – be attributed to a shift in the financial industry’s mindset to allow and facilitate the integration of digital tools, such as online banking and mobile apps, to help improve the customer experience. But the rate of integration and adoption differs vastly, from continent to continent. So what makes a mindset towards innovation choose ‘caution’ over ‘audacity’ when it comes to the world of fintech, and how are these different approaches shaping the future of the financial landscape? Frank Zhou, CEO and founder of Zeux, shares his insight on the future of banking.

 

Asia is wearing the fintech crown

Financial innovation and the adoption of fintech in Europe has been slow compared to Asia who has been more open to moving away from traditional banking methods. China is the largest alternative lending market holding around 90% of market share, with the US coming in second place.  Together, they dominate 95% of the market. Although the UK is ranked third, the market share is only expected to peak at a value of $4.8bn this year compared to China’s $265.7bn.

BANKING

Frank Zhou

At the head of the pack, Chinese investors are similarly quick to put their weight behind fintech start-ups as they seek to improve the operations of their banks and financial institutions. This forward-thinking approach has brought about the adoption of new-gen technology such as AI and Machine Learning to solve serious finance-relevant issues such as assessing risk and identifying fraud.

The US has demonstrated strong commitment towards adopting new digital technology as well. According to Ryan Battles, EY’s Banking and Capital Markets Lead for the Americas, “banking is finally starting to catch the wave that began with Apple and Amazon raising consumer expectations”.

 

Europe is only catching up with the Silicon Valley mentality

Europe’s fragmented nature – shaped so by its multi-languages, laws and cultures – pushes boundaries in the way of large scale business decisions. And rather than tackle the international markets, an often go-to European approach is to concentrate on developing business within Europe itself.

The Silicon Valley approach of ‘blitzscaling’, a phrase coined by LinkedIn Co-Founder Reid Hoffman, involves scaling at all costs including “doing things that don’t scale” and making deliberate choices without having all of the information—sacrificing efficiency for speed. There are clear risks involved by adopting this method of favouring quick growth on a global scale, but the results can be ground-breaking: think PayPal.

Europe may not have the tech titans that the US or Asia boast, despite having a strong industrial base, but in a ‘hare and tortoise’ style setting, has the potential to become the global fintech frontrunner, because where Europe can truy flex its muscle is in its regulatory prowess when it comes to AI. As with the rollout of GDPR in 2018, Europe wants to be identified as not just a true regulatory superpower but also as a tech superpower. The latest European initiative is to regulate AI through an ‘ecosystem of excellence’ and an ‘ecosystem of trust’. This new legislation will focus on AI applications that are deemed as high risk. Because as we know, Europe is, on the whole, risk averse.

At the same time, the UK itself continues to attract by far the largest share of fintech investment in Europe, with 83% of all European 2019  fintech investment, states Augmentum Fintech.

 

Bright future for the UK: Embracing the power of crypto

With the latest figures predicting traditional British banks could lose a further £8bn of revenue in the next five years, it’s no wonder there’s been an – albeit slow – shift to adopt tech-powered solutions in order to compete against trailblazer challengers such as Monzo and Revolut. Among the line-up of traditional banks that are rolling out new products are Santander and RBS, both of which are evolving the way they facilitate payments and transfers of funds.

Aside from these relatively ‘standard’ innovation developments around payment technology – that are more evolutionary than revolutionary – what else could help the financial sector catch up to its industry counterparts and drive real change? Does crypto really have a place? And how safe is it?

The US is embracing cryptocurrency as a safe digital currency because it trusts the technology behind it. Blockchain technology is an advanced way of logging and protecting data, which is difficult to manipulate or hack. It has the potential to improve security, productivity and customer experience when adopted by businesses in the financial sector. In spite of the bad press it receives, blockchain technology has been recognised as an emerging technology that could transform the banking sector due to the ability to improve trust, provide transparency and potentially lower costs, reduce transaction times and improve cash flow.

At the beginning of the year, even the Bank of England announced that it would consider adopting a bitcoin style digital currency as part of a global group of central banks. And that’s a big step.

Major financial markets around the world are still ahead of European and British banks when it comes to fintech innovation. AI and blockchain technologies are still in their relative infancies, and the pace of change and innovation is only going to gather even more momentum. Those who have made the smart decision to adopt, will reap the benefits that are to come. So, it’s more important than ever for the cautious approach that the British banking industry has demonstrated for so long to be replaced with a new, fresh hunger to harness digital technologies. Not only to guarantee growth, but also to remain competitive in a global market.

Innovation breeds innovation, it breaks through traditional models, and brings new opportunities to the table. The UK’s banks need to be smart with their next move and pull up a chair.

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