By Sarah Biller, co-founder of FinTech Sandbox and executive director of Vantage Ventures

The movement toward a financial system that is both sustainable and inclusive is a result of a societal shift in philosophy and awareness about what we value, and a desire to do something about it. Covid-19 upended many of our basic assumptions — for example, that a mass movement to remote work wouldn’t be possible, and that developing effective vaccines should take years — and showed how rapidly we can adapt. Now, as we enter a third pandemic year, we sense a strong desire among members of the global fintech community to create a normal that is not just new, but better.

Sustainable finance and inclusive finance are closely related but not the same, though both are gathering momentum. Sustainable finance is the process by which individuals and institutions take environmental, social, and governance (ESG) considerations into account when making investment and purchase decisions. Growth of sustainable finance has been strong and is being encouraged by regulation in some markets.

•  In the public markets, U.S. assets managed in sustainable investing strategies grew by 42% between 2018 and 2020.

• Also, by early-2020, global sustainable investment (SI) assets reached $35.3T — and now make up 36% of all assets under management across the US, Europe, Japan, Canada, Australia, and New Zealand.

We define inclusive finance as the availability and equality of financial offerings for all segments of society. Inclusive products and services give people agency in their financial lives. 

•  A recent study conducted by Plaid, a popular data partner in our Data Access Residency program, revealed that fintech expands access to the financial system for consumers in three important ways:

• Fintech breaks down barriers to access for vulnerable populations

• Fintech helps underserved consumers address their most pressing challenges

• Fintech serves minority communities in an egalitarian way

We believe sustainable and inclusive finance will lead to better economic outcomes for individuals and for society, without requiring a tradeoff between making a return and advancing these objectives. Rather, we maintain that they represent a large and attractive opportunity for the entrepreneurs who pursue them.

Innovations enabling inclusive and sustainable products and services are helping us build a better financial sector. At FinTech Sandbox, we are looking beyond traditional data sources to allow entrepreneurs to identify patterns, find areas for improvement, increase transparency, innovate in staid product categories, help investors allocate assets in support of their values, and underwrite without bias.

Regarding our Data Access Residency program, which provides free access to data for early-stage fintechs, we see accelerating interest from startups leveraging alternative data and emerging technologies to address sustainability and inclusion. Two current trends:

• More than 60% of our recently accepted startups make sustainable or inclusive finance a priority — the most our program has experienced.

• An increased interest in sustainability and inclusion has manifested in a rise in program applications from consumer-oriented fintechs: As a result, accepted startups this year were 44% B2B, 40% B2C, and 16% B2B2C, compared to 78%, 18%, and 4% respectively in 2020.

We’ve responded by expanding the data sets we offer. Our resident startups can now access data from Sustainalytics and Moody's NewsEdge, both of which joined our program in 2021.

We firmly believe sustainability and inclusion are the next stage of financial services. By empowering entrepreneurs to solve complex problems, access to alternative data will play an important role in the advancement of sustainable and inclusive finance. The best ideas will catalyze positive change across the world and bring in those who may be left out of existing financial systems.