Fintech makes ethical and responsible investing more accessible

The traction in sustainability investing is attributable to fintech being cost-efficient, simple and transparent

by ASILA JALIL / pic by BLOOMBERG

THE development of financial technology (fintech) has made ethical investing accessible, enticing investors to rework their portfolio to be more socially responsible.

Public interest in sustainable investing has picked up in the last five years as ethical equities continue to generate increasingly decent returns.

Stockspot Pte Ltd founder and CEO Chris Brycki said the company saw between 5% and 10% of its existing clients shifting to ethical portfolios, while it gained up to 20% new clients that are attracted to sustainable investing.

The traction in sustainability investing is attributable to fintech having advantages such as cost efficiency, simplicity and transparency, Brycki said.

“In the past, it was tough for you to know what you invested in and this is particularly relevant for sustainable investing because there were sustainable funds out there, but it was hard to determine whether what you were investing was aligned with your ethics and values.

“Now, the benefit we are seeing is there is a whole new low-cost and very transparent ethical options where you know exactly what is inside them and it enables you to choose one that is aligned with your particular view of the world,” he said during the SCxSC Fintech Conference 2020 held recently.

Technology has also helped in lowering the cost to invest, enabling smaller balance individuals to get involved with the activity which was only available for the rich in the past, he said.

The Sydney-based online investment advisor and fund manager company also learned that most of its clients prefer to not put money into companies that invest in fossil fuels.

Brycki said Stockspot, which has six years of traditional portfolios, has recently launched ethical versions for each of those portfolios that invest in specific types of exchange-traded funds that focus on removing companies that are deemed to be unsustainable, while adding more investments into sustainable ones.

“We surveyed our clients to work out what are the types of investments that they were and were not comfortable having in their portfolios.

“What we found out from our clients on what they are passionate about was that they did not want to invest in any companies with investments in fossil fuels. We made sure all the funds invested in do not have fossil fuel investments in them,” he said.

He added that the percentage of new clients that the company is seeing for ethical investments is made up of the younger generation mainly those in their twenties and thirties, while not much interest is shown by those aged 50 and above.

He added that responsible investing is also accelerating at a different speed in different parts of the world. Europe is seeing a rapid movement in this type of investments, while Australia and the US are slowly picking up the trend. Asian countries are still further behind.

Meanwhile, ConnectionPoint Systems Inc CEO Daryl Hatton said the development in fintech has made it easier for individuals to get involved in a cause and raise funds for specific issues. The advancement in technology allows donors today to be aware of the details of how funds are being utilised to make an impact within a community.

“A lot of the time when we are talking about charitable causes, we need to learn about it, what the problem is and how additional contribution can help change the outcome of that story.

Hatton said the desire to ensure their actions have an impact in the world or the giving behaviour is very pronounced in millennials and Generation Z, where they want to make a difference in the world and feel empowered when they can do so.

He, however, said the idea transcends across generations as it is highly dependent on one’s technical knowledge.

“You can have baby boomers doing the exact same thing and feeling the same way. The difference is not so much in the demographic age, but the level of technical maturity and adoption.

“We can see seniors actively donating online or promoting the causes that they care about, using the wealth that they have accumulated to make a big difference.

“So, it is less about age groups but more about how digitally savvy they are in the way they think about the world,” he said.