Tech with Impact
By: Varan Pathmanathan
Tags: Sustainability, Makeimpact, Investing, Sustainable Finance, Impact Investing

2019 was an impactful year! Sustainability, Impact and the 17 UN Sustainable Development Goals finally reached the tech companies within Insurance, Pension and Banking

This article is based purely on my own personal views and to this I add examples on the tech companies that already have created impactful solutions and will continue to do so in 2020 in the Nordics.

1. Insurance with Impact

Generally, insurance is created for doing good — for the society as well as for the individual. Insurance is a contract (policy) that transfers the risk of financial loss from an individual or business to an insurance company. The company receives money from its customers/clients and pools them in order to pay for losses. Thereby the insurance company and their customers/clients help each other whenever someone experiences a financial loss.

Source: Undo — Hövding Partnership

In the tech industry, we have seen a big movement from the new “Insurtechs” (short for Insurance Technology) wanting to create new ways of looking at insurance and thereby entering a market that previously has been dominated by the old and more traditional insurance companies. Latest, the Danish Insurtech Undo launched micro insurance on the new and pricey Hövding biking “helmets” to a low price of 15 DKK monthly to insure the users, if their Hövding unfolds in relation to an accident.

Insurtechs such as Troov and Lemonade are moving towards micro insurances and “on demand services” using AI/Machine learning. The big AI insurtech Lemonade are letting their insurance policy owners make their claims through an app, where the technology identifies and analyses the input in order to pay the claim directly to the customer. All done without the customers have to enter into a more traditional claims process known from the big and already established insurance companies.

Insurance for Social Good

Lemonade build their solution to lower the operational cost of running an insurance company and to help their users to claim the money for their losses in a frictionless and easy way.

Source: Lemonade GiveBack Programme

Last year, Lemonade launched their GiveBack Programme where they offer their customers to choose a cause for which they would like to donate their unclaimed money to, so their customers contribute to a better world. Where we previously didn’t have the opportunity to decide for ourselves what the profit of an insurance company was used for, Lemonade — which is built by purpose driven founders — enables their customers to choose a predefined cause and then make their contribution. For me, that is tech with impact!

BusinessModel: B2C

Source: Tryg Yearly Bonus Programme

The Nordics have the opportunity to Give Back. Tryg, a big Nordic insurance company — which also owns the InsurTech Undo could in my opinion look into a GiveBack Programme.

Tryg claims that over the last 4 years, they have been paying a yearly bonus of 8% to their customers. They do not state whether it’s because the customers are good at not having any financial losses throughout the years or that the customers simply pay too much for their insurance? In 2019, around 925 million DKK was given back to the customers

What if the 925 million DKK was spent on doing good?

What if Tryg took the 8 % bonus and simply gave their customers an opportunity to give back through a set of predefined causes that all are aligned with Tryg’s impact agenda?

And if Tryg isn’t just an insurance company but a part of a banks offering, they could also move this 8% bonus into impact investing, so their customers wouldn’t see this as a donation but as an impact investing opportunity to use the money to do good.

2. Pension — Long term investing in the society

The last couple of years, there has been a huge debate regarding what our pension money is used for — Should our pension money be invested in sustainable businesses rather than in the non-sustainable ones?

Pension companies are moving away from black businesses to more green businesses all while their customers are demanding a more greener pension scheme than ever.

Not many tech companies have made it yet in regards to sustainable pension, but here in the Nordics the pension tech company Matter made one of the first sustainable pension solutions for customers through their partnership with AP Pension (formerly Skandia Pension DK). Matter have with their platform enabled the customers to see their societal impact on their pension savings in terms of Carbon footprint etc.

Business Model: B2B & B2C

Source: Matter Pension

The New generation of pension savers

Last year, we saw how the new Generation Z (also a part of the Greta Thunberg movement) entered into the workplaces with their purpose driven mindset, setting high standards for the societal impact of global companies. In terms of savings, it’s widely known that the younger generation actually care about savings — both for the future of our society and for themselves.

Traditional players don’t yet walk the talk

We are slowly but surely seeing a growing number of larger pension companies changing their investment strategies towards a more — in my opinion — customer oriented strategy, where the focus is on the environmental impact driven by the demands of their customers.

I think we still have some years to go before it will change dramatically, since the way we reward our employees within the companies is by financial return and not by the size of potential impact — impact measured in Environmentally, Socially and by Governance.

Though on the Nordic scene, pension companies such as Pension Denmark, MPPension and Storebrand have stated their commitment to a sustainable future and are currently changing not only their investments but also their operations to become more sustainable.

Below you can see a visualization of Storebrand’s sustainable investment methodology, where they first exclude, then look at the company’s sustainability rating and then finally engage with them.

Source: Storebrand’s Sustainability Investment Methodology

From a low to high in Risk, to thematic investing in Sustainability

It is interesting to see when the demand from the younger generation comes in terms of being able to have a more firm voice of what to invest in and how the money has to be invested.

From a traditional low-middle-high risk going to a more customer oriented self-selection thematic model like the example below from WHEB Asset Management

Source: WHEB Asset Management

3. Banking & Wealth Management with Impact

Within Banking and Wealth management, there is a lot of traction within consumerism and investments in sustainability.

New solutions for making the world a better place all while focus should be on how we can become better at taking wiser decisions about our consumption as well as how we save our money for a better and more sustainable future.

If we take a look on how we in the Nordics perform in regards to the World Overshoot Day, we simply need to change our habits to consume less and if we do consume, we need to consume with a better sustainable footprint.

Regarding the latter, the Swedish fintech Doconomy is a great example of tech with impact and definitely worth following in 2020.

Doconomy — a credit card that limits the negative impact

The Swedish fintech Doconomy announced in late 2019t their collaboration with MasterCard — offering their users a Black credit card which limits their uses to transact/buy products from vendors that have a specific set of negative impact which again helps and eliminates consumption in companies that do not contribute positively. This solution is also expected to be launched with more banks in the Nordics in the coming years ,since the demand from the users is growing.

Doconomy also just recently launched their solution, Ålandsindexet, together with Nordea where they offer calculations on the CO2 footprint of the general consumption of the Nordea bank customers after every transaction.

Business Model: B2B & B2C

Trine — invest in solar

A 5 year old tech company, now scale-up, called Trine made their entrance in various media, when they stated they wanted to get around 1.2 billion people out of energy poverty, creating a crowdfunded investment fund investing in solar projects in Africa.

Their solution allows everyone to invest through crowdfunding in solar projects and makes it possible for each person to support SDG 13 — Climate Action and SDG 7 — Affordable and Clean Energy.

Until now, more than 10.000 investors have backed their solution with over € 30.000.000 and supporting nearly 2 million people in Africa with electricity.

Business Model: B2C

Source: Trine Solar

MakeImpact — sustainable investing using the SDGs as a framework

Read more on www.makeimpact.io

With my educational background in persuasive design and sustainability as well as my 8 years in investment banking working with business development, I got the idea in the summer of 2018 to build a solution to help the non-investor to get started on their impact investing journey using the 17 UN Sustainable Development Goals (SDGs) as a framework.

Me and my co-founder established a team back in August 2018 and used the first 6 months doing market research with our key target audience — the non-investor who would like to use their money to make an impact in the world. After several design sprints, we began to develop the first Minimum Viable Product (MVP) and launched in late April 2019.

MakeImpact is an a free investment app with the goal of making it easier for you to invest in companies that meet one or more of the 17 UN SDGs. The app showcases public available data on the various sustainable commitments from global listed companies — all members of UN Global Compact — and lists them according to which of the SDG’s they support. In the app, you can therefore choose the SDGs that best suit your own values and based on the SDG’s you choose, the app will match you with the companies that support the same goals as you.

Since the launch of MakeImpact 11 months ago, there have been over 1600 downloads of the MakeImpact app and more than 1000 users have chosen to register through the app. These users are represented in 54 different Danish banks and we have already helped a lot of users to get started investing with a purpose. We are right now working on many exciting things which will be launched later this year.

Business Model: B2C & B2B2C

4. Winning the impact of the new generation of consumers, savers and investors

Photo by Callum Shaw on Unsplash

But to win the market of the new generation of consumers when it comes to their savings and wealth, we need to do the following:

First, we need to embrace auto enrollment. We know that the younger generations are fast paced, always connected to devices and adept multitaskers, but it can be difficult to get their attention. Incorporate that and auto-escalate it into their retirement/wealth management plan and they’re on track without having to go in and make a proactive choice or selection. Studies show that making auto enrollment optional boosts employee participation by 40%. Second, we need to make online financial wellness tools available.I personally think companies have to realize they have a big role to play when it comes to engaging younger generations entering the labor market. If they help young workers understand what they’re facing and create a long-term sustainable plan for success, they will also create loyalty and enable retention whether it is for their workplace or for their bank/insurance or pension. Make them co-owners of their own financial planning. Utilizing things like gamification is an enabler for their knowledge gain and understanding of the new “financial world”. And finally, we need to embrace digital components. Historically the financial sector has been great in just “digitizing” a document but haven’t used time on visualizing and simplifying the information described in the documents. If you really want to educate the younger generations, you simply need to visualize the content of these documents by for instance infographics, visuals and videos to ensure they understand it and do not just push the accept button — of course all easy accessible on both mobile and tablet devices.

‍Varan Pathmanathan is the CEO and founder of MakeImpact, a Nordic Impact Fintech that helps individuals make sustainable investment decisions using the UN SDGs framework. After graduating from Aalborg University in 2011, he spent several years working in the investment banking sector and worked in several banks in their business development units. He has a background in Human Computer Interaction from Aalborg University & University of Melbourne, in Persuasive Technology.