Do the right thing and the bottom line will take care of itself
This is the second part to Redefining our economic infrastructure: the opportunity for global green fintechs with Geilan Malet-Bates, the Chair of the P27 Green FinTech Forum and a regular contributor to green finance debates and consultations. Geilan joined Morgan Stanley’s capital markets division 20 years ago where she managed institutional client relations in Europe. She then went on to advise global fintechs on strategy and business development. In 2018, Geilan co-founded Plenitude, an ESG-focused digital wealth and pensions manager. In 2020, Geilan was included in the Innovate Finance Women in FinTech Powerlist. Geilan also sits on the IOD National Sustainability TaskForce in addition to being an International Advisory Board member of the W Startup Community and the Co-Editor of a pending book on Green Finance and Fintech. Geilan is a UCL and Bocconi alumna who is fluent in English, Arabic, French and Italian.
Your expertise and current focus is on the fintech ecosystem. What are your insights working with this type of global start-ups in terms of their sustainability specificities, needs and gaps?
I would say that it is a mixed bag. For some, sustainability is a natural part of their ethos, the founders are quite savvy and are driven by a coherent notion of how to contribute to a sustainable world. For others, this is not the case – some simply because of a lack of interest (running after financial ROI only), but there are also others who would like to be more conscious in their business operations, but need help understanding how. From an overall perspective and judging from the many startups I’ve come across, I would say the majority are thinking about their offering from an impact perspective i.e. which SDGs are they qualified to be focusing on meaningfully. There are always first order impacts and second order (synergistic) effects on others. Hence, we need to be transparent and clear to define measurable KPIs with regard to what one is trying to primarily achieve.
The advice I continue to give startups is to not overwhelm themselves. Start small, bearing in mind that especially at the nascent phase of their existence, there’s a fine line between the company’s survival – getting it running off the ground with limited resources – and trying to incorporate sustainable products. Yes, it’s important to think ahead about future projects (and some investors do enquire about this), but the important thing is that it’s not always possible to do everything at once (dependent also on the nature of the startup), so just take one steady step at a time.
If we look at sustainability beyond the aspect of being operatively greener, funding access remains an issue for many. I see limitations in how VC’s qualify startups, perhaps not fully understanding the concept of sustainability themselves, and failing to offer the guidance and support that are truly required. Likewise, I see limitations in how startups qualify investors too. I tell startups often that they’re not at anyone’s mercy – partnerships are no different to marriage and so taking the time and doing due diligence on prospective investors is critical. Not all that shines greenly is green. A lot of people want to jump on board what they perceive as ‘hype’ or the latest trend and so are not following through very well on setting their businesses up for success.
What are the key sustainability trends, risks and opportunities fintechs and innovative companies need to be aware of and start preparing for (and how)?
The main concern to me is the manner in which we’re transitioning. Let me discuss a few thoughts:
- Overconsumption: We’re operating in a world where we’re trying to maintain the same base levels of per capita consumption but just trying to make them feel ‘greener’. There is definitely overconsumption and with a growing global population, in addition to much of the existing becoming more affluent, this will only be further exacerbated, so we should perhaps consider how and what experiences we can substitute those material things with. No-one is saying that making money and sustainability don’t go hand in hand but we need to revisit our priorities as a society.
- Short-Termism: EVs – there is scepticism about jumping on this full-swing given the ‘this looks fantastic right now because whilst we’re not sure of the true ramifications, it’s the polar opposite of what we consider bad and we’ll deal with the consequences later’ aura, as I touched on regarding Tesla above. But this extends to other areas beyond EVs too. As humans we tend towards binary thinking; the world isn’t binary and so we need to consider that moderation is perhaps our friend.
- Narrow focus: most companies only talk about carbon but we need to look at the bigger picture. The COP26 final text mentions methane for the first time which is integral to the GHG discussion but we need to look beyond this still.
We need to stop deforestation and yes we need to replenish lost trees. But even with those founders purporting to be planting trees if people do a particular activity, the narrative continues that those trees will help with carbon capture within the next decade. I’m not a scientist, but I do know that for a tree to be able to capture carbon, it has to be mature, and that takes circa 40 years. Not all tree species are appropriate either. This is why the Amazon’s rapid degradation doesn’t bode well for any of us, because those are adult trees that not only sequester carbon, but support a whole natural ecosystem locally and globally, which in turn serves humanity – and we’re damaging that.
Carbon Tunel Vision
Carbon Tunnel Vision Chart Inspired by Jan Konietzko
Carbon capture shouldn’t be considered a silver bullet to emissions reductions. My worry, given the amount of activity in this sphere, is that it will be considered by especially the largest companies, an easy opportunity to assuage their reduction responsibilities, when in fact such technology should only be used on a real ‘need to’ basis.
- Adaptation: We need to embed adaptation into our business models. We’re not going to mitigate the extreme climate events we see and their effects, but adaptation is about creating infrastructure that minimises those effects and that protects the communities most impacted by them.
- Data-driven and client-centric solutions: Those are the companies that will thrive, driven beyond the desire to just ‘make money’, and who will outlive the bandwagon jumpers in their respective fields.
- Impact investing and personal pension solutions: There’s been a lot going on in this space globally, but solutions haven’t been considered as effective as they could/should be. Business models tend to largely be the same and so there’s much to still be achieved from a true impact perspective.
- Inclusive crypto: Though anyone who knows me, knows that I’m not a fan of crypto in its current state, especially because of the notorious headliners and their incredibly poor environmental effects, even more so when we look at why those currencies exist, I do acknowledge that there are alternatives out there that purport to be more environmentally friendly in their attempt to make finance more inclusive. These are however not as widely adopted as the large names we know and whilst they do seem driven by more altruistic reasons, I think it’s yet to be seen what their true environmental impact is, as they develop to serve the masses they don’t yet serve. There will be room for those solutions that ultimately respect regulatory boundaries.
- Transparency and collaboration: We can’t talk about tech without mentioning Meta and its controversies, which draws our minds to those companies who do recognise and provide transparent and data-privacy-respecting solutions. But more than an opportunity for startups – it’s also an opportunity for traditional institutions and an imperative that they embrace these innovative companies.
Founders like me, experienced innovators who have identified pain points in their spheres, are also often excluded from conversations hosted by large companies that should not remain closed doors, as we also saw during COP26. Additionally, financiers for the most part are not also scientists and we need scientific experts and multidisciplinarity in sustainability conversations.
What advice would you give to start-ups that don't want to compromise between social/environmental responsibility and financial reward?
My question would be, why do they feel there’s a compromise between those two aspects? Being more responsible isn’t mutually exclusive to financial wellness. Responsibility and reward can and do go hand in hand. And in any case, sustainability is defined by 3 pillars – economic (profit); social (people) and environmental (planet). If one looks after people and the planet, they’ll in turn look after you (profit) so sustainability is a matter of good business sense. “Do the right thing and the bottomline will take care of itself.” It’s baffling to me at this stage for any founder to not appreciate that. But if those founders insist on their stance, then with time they’ll find themselves representing the startling statistic of the 70-80% of startups that fail – that’s what’s sitting in VC portfolios these days.
From a strategic viewpoint, any startup that focuses solely on the money, rather than qualitatively building up an entity, is following a defective path. If you care only about profit, then that’s a governance issue at heart and it means most likely that your decisions about your strategic direction, hiring, team morale, interactions with potential partners, how you qualify investors – the human aspects which are integral to a successful business – won’t be healthy ones, integral to your business’ sustainability. I’ve advised many startups on these issues and there are those that consider them ‘fluffy, nice to have’ – at their own peril.
From an investment point of view, more investors are looking at how companies are incorporating ESG factors into their considerations – ‘future-proofability’ – what problem is your company trying to solve? ESG ultimately concerns risk mitigation and therefore factoring those costs into your business model which have until now been unquantified. And if you’re a B2B SaaS FinTech then you’re also going to be dealing with financial institutions who are highly regulated and also obligated to their shareholders and clients, to deliver both sustainable and enterprise value.
Clients are driving demand and are also looking at the social and environmental credentials of companies.
With regards to talent attraction and retention, I’ve been approached by quite a few professionals, especially this past year, who are looking to embed purpose into their careers and therefore steering themselves towards those companies who are on a journey of sustainability. A lot of conversations I’ve had with current entrepreneurs, but also other professionals, have tended to them being inspired to want to make a difference and are therefore also seeking values-led opportunities.
Ultimately any business not considering social and environmental factors, is only hurting its own bottom line. The considerations don’t need to be onerous – I’ve advised a lot of startups on simply starting with a simple but meaningful corporate social responsibility statement. By meaningful, I mean e.g if you support more women being educated and empowered, what actions, with clear measurable KPI’s that can actually be showcased, are you taking towards this. Empty statements will no longer be tolerated. And don’t list a plethora of SDGs either – that’s unrealistic. No one company is going to be tackling all or even the majority of SDGs. We need everyone tackling the few they realistically can, but exceptionally well. Quantity with mediocrity at best, is certainly not what the world needs more of, or at all.
What keeps you motivated to continue this sometimes uphill struggle of pushing for systemic change in finance to allow for a more sustainable future for all?
The world is a place full of immeasurable beauty but it’s also a damaged Earth. My stubborn nature pushes me to be the maverick, as some have named me, who aims to right the wrongs. I have a lot of energy, I love a good challenge and there’s so much more I feel I can and want to achieve, that I’m only just scratching the surface.
When you find your purpose, you don’t just let go of it. It’s an inherent part of who you are, your beliefs, principles, what you eat, live and breathe. I grew up in one of the countries we consider ‘over there’ and I have friends who hail from other ‘over there’s’. That makes you view the world through a different lens. Climate crisis and an unsustainable world mean the already very poor and the most vulnerable, get even poorer. It’s also of great comfort that I share this passion with others. I’m always having a conversation about sustainability.
Ultimately, I want to have left a net positive impact when my day on this earth is up. So I think a lot about when I’m in the autumn/winter of my life – how I want to look back on my journey and the legacy I want to have left behind. Each and every one of us has the choice between either being a passive transient in this world, merely existing, going about our business and surviving, or we can choose to leave a positive mark behind us and a better future for all our future generations – I believe my purpose is the latter.