The Future of Finance

The Future of Finance

This is the final instalment of our Future of series. We hope you have enjoyed our deliberations over how some sectors might evolve to face future challenges.

It made sense to finish with one of the oldest industries in the world. From the days of merchants and primitive banking in the Roman and Greek empires it has evolved into to a hugely complicated and truly global financial system. But how will the finance industry evolve to face the sustainable challenges of today and in the future?



Global account ownership increased from 51% to 76% between 2011 and 2021 Adults with an account (5) 2011-221


Source: Global Findex database


A recent Global Findex survey showed that in 2021, 76% of adults had an account at some kind of bank or money service provider. This figure highlights an amazing growth rate in account ownership of 50 percent in the 10 years from 2011 to 2021. Great news right? If you are a glass-half-full kind of person, it is – but on the other hand it means that nearly a quarter of the world’s population still has no access to finance.


The majority of people with no access to finance are in developing countries and subsequently, they are vulnerable to abuse by scrupulous doorstep lenders or have to resort to hiding savings under the mattress.


So what can be done about it?


Financial inclusion is essential in eradicating poverty and fighting against inequality. It allows people to access housing and employment, which in turn leads to economic growth.


India, for example, is home to a staggering 130 million adults without access to formal banking, so it was good to see Prime Minister Narendra Modi recently announce measures designed to bolster financial inclusion in the country.


As with so many things in our modern lives, tech has a key role to play here - the aim is to accelerate digital banking in the country by introducing 75 digital banking units, or 'DBUs'. These DBUs are specifically designed to reach non-urban areas, which are home to a large proportion of the 130 million mentioned above.


We recently bought shares in HDFC, which operates in around 70% of India's 706 rural districts and plans to double its presence in rural villages over the next few years. Like the government, it sees tech as crucial to this plan and has invested heavily in building up online banking capabilities. It is also heavily involved in initiatives around housing and has taken 15% of the credit-linked subsidy scheme for affordable housing since its launch in June 2016.


These steps are a huge benefit to those who need the most help to gain access to finance that is far cheaper and safer than the alternatives.


We hope to see other initiatives in countries which are equally as impacted by the great un-banked.


It’s not easy being green

We can’t discuss finance without looking at the products and practices of major financial institutions. Over the past few years there has been an explosion in sustainable assets under management.


Quarterly Global Sustainable Fund Assets (USD Billion)


 Source: Morningstar Direct, Manager Research. Data as of September 2022.


We applaud the fact that investors are willing to put their money where their mouth is – but there has also been significant concern that some funds might not be as green as they seem. So, as greater scrutiny is placed on what is contained in these funds, what can we expect?


Firstly, there will be a greater degree of regulation underpinning these funds in the future – we are already seeing the definitions and standards under the European Sustainable Finance Disclosure Regulation (SFDR) being tightened up. We can expect this to continue, and more alignment with taxonomies expected. One would hope that the Social Taxonomy will finally come to fruition; although climate change is the priority topic in the minds of most ESG professionals, it cannot be at the expense of the huge issues in the S of ESG.


The FCA in the UK and SEC in the US have also announced standards and requirements for the sustainable investment field. As with any regulatory developments, these requirements can seem somewhat burdensome at the time of adoption, but if they cut through greenwashing and provide greater clarity and confidence in consumers’ minds, this will be a small price to pay.


Do as I say, not as I do

Although the focus is on what is in sustainable funds, we also need to understand who is funding the activities that are less than sustainable. There is evermore focus in getting to net zero, and time is running out. Some activities must stop if that is to be achieved – but in a capitalist society, this is only going to happen if it is no longer economically viable to continue those activities.


While there has been good momentum in changing attitudes towards fossil fuels over the past few years, there has been a definite stall as a consequence of recent geopolitical unrest. While this is understandable as a short-term reaction to the shock of the situation, it should provide society with a jolt to greatly accelerate the move to renewables. Time will tell whether the consistent efforts from consumers, investors and governments will be successful in achieving this ambition.


In the future, we hope that the transparency of what our major banks are funding in their corporate divisions is improved to allow underlying customers of these banks to hold them to account. We are beginning to see this happening through reports such as Banktrack – but there needs to be greater transparency in the strategy to reduce these exposures while also ensuring a just transition that will not disadvantage those in the developing nations. This is a difficult balancing act to achieve but a very necessary one to keep the ambitions of Net Zero alive.


These are just a few of our thoughts on how the finance industry might develop. On the whole, we are optimistic on the outlook for a fairer and cleaner industry that we can all be proud to be a part of.

Important disclosures

More about the authors

Miranda Beacham Head of UK Responsible Investment.

Miranda Beacham is Head of UK Responsible Investment.

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