The fintechs trying to turn retail investors green


A note to readers: #fintechFT is taking a break next week. We’ll be back in your inboxes on April 12.

The growth of online brokers like Robinhood means would-be traders can now buy stocks on their phone faster than you can say “underlying fundamentals”.

However, one of the buzziest areas of the investment world has lagged behind modern users’ appetite to have all of their data at their fingertips. ESG — that’s environmental, social and governance — investing has seen a massive surge in popularity recently. Sales of ethical funds tripled in the UK in 2020. But finding information about the carbon impact of investments has long been a difficult, manual process for retail investors.

There are also still serious questions over the validity of data provided by so-called ESG funds, with no standardised measurement across the investment sector. What ESG even means remains utterly mysterious for most everyday investors looking to make their money do good while generating hefty returns.

However, “green fintech” is beginning to catch up.

“This data hasn’t been available to retail investors in the UK at all,” according to Josh Gregory, founder of UK-based Sugi. Though information has been available to institutional investors looking to shore up their green credentials, it has missed out the DIY investor movement.

“It’s a democratising moment for that kind of data in the UK,” said Gregory, who worked in sustainable finance for over a decade before deciding to enter the retail market.

Sugi is currently in beta, but come May, investors in the UK will be able to take the temperature of their portfolio to determine how their investments line up with the Paris agreement’s goal of keeping global warming to an average increase of 2 degrees.

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The company allows investors to link their Sugi account to their brokerage accounts on platforms such as Vanguard, Hargreaves Lansdown or Nutmeg. It then provides data based on information from o than 4,400 listed companies, weighted according to the investor’s individual holdings. 

If your portfolio is a bit warm, Sugi will recommend other companies in the sector with better temperature scores based on Sugi’s analysis and algorithms. Sugi also shows your investment performance, so no need to check back to your broker to see if your returns are also running hot and cold.

It is just one part of a rapidly growing trend of ESG-focused fintechs looking to meet demand from retail investors and savers to improve their ethical credentials. Swiss-based Yova helps new investors create portfolios according to ESG principles that matter most to them. FossilFreeFunds.org lets investors find mutual funds and ETFs that avoid or limit fossil fuel investments.

Retail investors are a growing force to be reckoned with, a trend that has been accelerated by the coronavirus pandemic. In the US, they now account for almost a quarter of the stock market by trading volumes, according to UBS equity research, up from less than 10 per cent in 2019. 

By September 2020, the amount of assets under management by the UK retail brokerage industry hit £245bn, up from £200bn six months earlier.

“There is political power behind empowering retail investors rather than approaching institutional investors behind closed doors,” Gregory said. “We want to put the tool in the hands of as many people as possible. Retail is 20 per cent of the UK market so that’s our playground.”

Mobile investment apps have improved rapidly as market pressure from neobrokers such as Robinhood raises expectations of what investors should be able to have in the palms of their hands. A slick app might sound like no big deal to the Gen Z’ers out there, but this is a wild departure from what was normal for the investment industry even a few years ago.

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While the gamification of investing has plenty of critics who say it masks the risks of investing, Gregory — a fan of the trend — felt creating a “very visual” app was key to getting everyday investors engaged with ESG finance, and to “nudge” them toward better options. Sugi uses red and green colour clouds to illustrate how users’ investments are are performing.

So far, it turns out the average investment portfolio assessed by Sugi is aligned with a 3-degree temperature increase, exceeding the target considered the absolute maximum for avoiding “catastrophic and irreversible effects on the planet”. No pressure . . . 

Quick Fire Q&A

What’s your name? Pollinate

When were you founded? 2017

Where are you based? HQ is London, and we also have operations in Australia, South Africa and North America.

Who are your founders? Alastair Lukies CBE, Fiona Roach Canning, Tim Joslyn and Jonathan Hughes

What do you sell, and who do you sell it to? Pollinate gives banks a single platform for SMEs to take payment, manage and grow their businesses, and connect with communities.

How did you get started? Pollinate and NatWest Group reimagined merchant acquiring, creating the platform powering Tyl in the UK and now other banks worldwide.

How much money have you raised so far? £70m, with our most recent raise ($50m series C) completing last week.

What’s your most recent valuation? Over £100m

Who are your major shareholders? Insight Partners, NatWest Group, Mastercard, National Australia Bank (NAB), EFM Asset Management and Motive Partners

There are lots of fintechs out there — what makes you so special? Banks, small businesses, and consumers drive our economy. Our platform connects all three. 

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Fintech Fascination

The star fintech investor caught up in Greensill’s collapse: The Greensill Capital saga continues to draw in more individuals and institutions, from former prime ministers and insurance groups, to the storied private equity firm General Atlantic. GA has built up an enviable reputation in the tech and fintech sectors thanks to well-timed bets on firms such as Adyen, Klarna and Alibaba. No venture capital firm expects every single investment to pay off, and GA is only one of several big names that supported Greensill, but it has drawn particular scrutiny thanks in part to the fact it took an unusual loan from Greensill that was flagged during an internal investigation by insurance group Tokio Marine. 

Wirecard fallout: Not to be outdone in the fintech scandal stakes, the Wirecard affair continues to provide shocking news nine months after the German payments company collapsed. Oliver Bellenhaus, a former Wirecard executive turned chief witness, has told prosecutors that the company’s fraudulent activities started more than a decade before it collapsed — five years earlier than prosecutors had initially suggested last year. Read the latest story here and catch up on the whole Wirecard scandal here.

Goldman-backed fintech hits £1bn valuation: Lendable was valued at more than £1bn when insiders sold shares in a secondary sale earlier this year, Sifted reports. The seven-year old company, which provides personal loans on behalf of institutional investors, has grown into one of the UK’s few profitable fintechs, despite having raised a comparatively tiny amount of equity funding.



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