Research Reports
Data Republic website
Published
Share
Share on facebook
Share on twitter
Share on linkedin
Share on email

UNEP releases fintech & sustainable development report

The most recent UNEP report – Fintech and Sustainable Development: Assessing the Implications – examines the impact of fintech on sustainable development, focussing specifically on the potential that the combination of blockchain, AI, and IoT has to enable the sustainable development agenda at scale.

Newly released UNEP report – Fintech and Sustainable Development: Assessing the Implications – was delivered as part of the on-going ‘Inquiry into the Design of a Sustainable Financial System’, an initiative mandated by the United Nations Environment Programme (UNEP) that aims to advance policy options to improve the financial system’s effectiveness in mobilising capital towards sustainable development.

The report is introduced under the premise that finance needs a revolution. Right now, the financial system is in a constant flux between turmoil and transition, which is in part driven by inadequate policy and regulatory responses to climate change, as well as the aftermath of the financial crisis. Fintech’s role as a core disruptor of the financial sector is indisputable these days; however, novel combinations of tech of are expected to set off another wave of innovation soon. While the future with fintech promises a more efficient, accessible, and less vulnerable financial system, it also bears many risks, such as the threat of continued job loss due to AI-led automation.

The first edition of the inquiry – ‘The Financial System we Need’, released in 2015 – provided an initial, high-level landscape review of the potential for fintech to advance sustainable development. Tech innovations already offer solutions for sustainability across five key functions of the financial system, namely: moving value; storing value; exchanging value; funding value creation; and managing value at risk.

The central question that guided the course of the report was: How can fintech innovations help or hinder in harnessing the financial system to align financing with sustainable development outcomes? Furthermore, what kind of changes can be expected to arise from fintech disruption? How will changes brought about by fintech disruption impact sustainable development goals?

The premise for the approach outlined in the report is UNEP’s belief that the combination of Internet of Things (IoT), blockchain, and AI – if deployed correctly – has the potential to enable the sustainable development agenda at scale. For financial systems, a two-folded challenge surfaces: capital must be mobilised for specific sustainable development priorities, and sustainability factors need to be streamlined across financial decision-making. The report outlines six key necessities for scaling, and eleven barriers to scaling, which can be seen below:

Key dependencies for scaling

  • Need for industry-wide interoperability standards and network interoperability
  • System and process integration challenge across institutional borders
  • System-wide coordination barriers
  • Migration away from IT infrastructure legacy
  • Broadband connectivity requirements
  • Enabling (pseudo) anonymity

Key barriers to scaling

  • Regulatory barriers
  • High energy bitcoin network consensus cost
  • Requirement of a validation network
  • Scalability of blockchain and technology robustness
  • Operational transition risks
  • Immutability barriers
  • Incumbent business model risks
  • Security, privacy and resilience against cyber-attacks
  • Cost sharing across the network
  • Network governance
  • Legality of smart contracts

To download the complete UNEP Fintech and Sustainable Development Report, click here.

Share this Article
Share on facebook
Share on twitter
Share on linkedin
Share on email
Related Insights
Featured
Amsterdam Fintech Week
Take a look at our yearly fintech festival, Amsterdam FinTech Week. Go on the dedicated website to check out the 2021 wrap up!
AMLD5 Guide
A source for consulting PSD2 legislation coupled with commentary, tips & tricks, applicability, in collaboration with our member law firms.