by  Anton Kaidorin

ESG Initiatives Show Tech Continues to Drive Societal Benefits

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There is little doubt that new software technologies in general and those in the finance industry in particular have been, and will continue to be, a force for wider social good across the spectrum of financial services, whether in terms of new tools, services, capabilities or outcomes.

The latest evidence is where an avalanche of ESG initiatives is already dramatically reshaping business operations in both the financial and main street worlds. Driven by consumer, investor, and stakeholder demand – it is creating opportunities for software development to be a key driver of change and play a significant role in both the definition of rules and standards for the financial industry and the way these are implemented.

These points are further underscored in a more detailed perspective I prepared for NASDAQ about the enduring benefits of technology investment. Fintech is Set to Take on the ESG Challenge | Nasdaq

The environment has been one of the most productive areas where software firms have already positioned themselves as main players across the green spectrum. The flexibility and adaptability of new software development quickly became an important enablement factor for the green investment industry. And it has now demonstrated its capability to apply original (often non-financial) approaches that work for financial industry needs.

These included resources such as satellite image recognition, NLP for analysis of disclosures and other advanced analytics and the way these unstructured data sources can be integrated with more accepted structured data. But most financial institutions also continue to rely on traditional technology skills and resources (often from outsource providers) to strengthen their new technology needs, with software developers and advisors still playing a key role in the definition and delivery of new capabilities across the wider FSI world.

Inclusive finance is one area already established as a cornerstones of technology’s societal influence, considering many software firms started life as social projects like banking for the unbanked, and micro-lending in developing countries. But, given today’s potential recessionary and global inflation pressures, recovery finance could be set to become another important area where these same software firms should be ready to leverage skills like AI and advanced analytics to tailor personalized recovery plans for impacted groups of people.

Governance is one of the newest and most challenging pillars, where capabilities provided by software vendors can bring crucial benefits to the development of the ESG and wider regulatory environments. Technical capabilities presented by software specialists can help define the depth of ESG data transparency and standardization of approaches. AI/.ML, big data, advanced analytics, and cloud computing capabilities can also be applied to revolutionize ESG compliance. This could range from periodical “disclosures” into the continuous quantifiable processes that minimize the risks of “greenwashing” and other manipulations and provide more transparency for investors and consumers. But to do so, regulators will need to collaborate with these initiatives to co-ordinate visions that standardize capabilities and to effectively leverage technologists to deliver change.

The role of software development has always been to bring the best-of-breed IT skills to the fore in ways that transform financial services for the benefit of both providers and their customers. Given such a successful track record, the time is now right for this to extend further into the specific challenges of ESG and financial inclusion where closer collaboration and innovation will almost certainly deliver even more benefits to business models and customer expectations.