ETHICS, TRANSPARENCY AND IMPACT: THE CONDITIONS FOR A NECESSARY SHIFT TOWARDS A PROFITABLE AND SUSTAINABLE FINANCIAL SYSTEM

On September 5th, Convergences launched its 3rd Impact Finance Barometer, entitled “The financial system, economic players and territories: How to strengthen dialogue and change the profitability paradigm?”.

Discover the publication

This publication, which draws on the expertise of impact finance organisations and has been made possible thanks to the support of leading partners, aims to serve as a guide for directing financial flows towards the key players involved in transition. It should enable a wide range of stakeholders to better understand the issues, define their vision and performance in terms of impact in relation to their profit, with a view to better steering their roadmap with the players. It provides an overview of the financing needs for a fair ecological transition, the role of the current financial system, its evolution and the parties involved. The barometer, which highlights the key figures of impact finance, underlines the need for financial institutions to operate transparently and ethically. With concrete proposals for improving the financial system, how is this new form of finance fitting into the French economic landscape? How do public policies implement these new financial systems while preserving their profitability? These are the questions that Convergences and the organisations contributing to the Impact Finance Barometer, including FAIR, the Finansol label, MFR MicroFinanza Rating, KPMG, Helios, FADEV, Cerise+SPTF, France Assureurs and La Nef, attempt to answer in this 3rd edition of the barometer.

A common view, but a contrasted assessment

As reiterated at the Summit for a New Global Financing Pact 2023, the financing gap for the ecological transition and the fight against global warming, estimated at an average of $1,000 billion per year by the end of 2023 for developing countries, requires the massive mobilisation of private finance. However big this amount may seem, it represents only 1.1% of the GDP of advanced economies, and only 1.4% of the global economy. With financing needs for green infrastructure now estimated at around 6,000 billion dollars a year worldwide, particularly in emerging and developing countries, only 1% of financial assets under management are considered to be linked to impact investments. The challenge over the next few years is therefore twofold: not only will it involve directing investment flows towards the stakeholders who will have a key role to play in achieving the ecological and social transition, so that 10% of financial assets are earmarked for these transitions by 2050, but it will also involve measuring and reporting on their social and environmental impact in the same way as we report on the financial benefits.

Confirmation of strong trends in a financial sector that is in favour of a transition with socially responsible and participative finance in France and financial inclusion around the world

While traditional finance has left a gap, solidarity and participative finance has confirmed the interest of savers seeking to give meaning to their money by participating in the development of companies and associations with a strong social and environmental purpose, which they finance by subscribing to solidarity savings products. Solidarity savings, which aim to finance environmental and social projects for the common good, encompass three channels, all growing by 7.37% compared with 2021, with €26.3 billion in outstandings: solidarity employee savings (€15.3 billion), solidarity bank savings (€10 billion), and solidarity companies opening up their capital (€1 billion). The keys to strengthening this trend, driven by savers’ quest for meaning, may lie in building confidence, which could be fuelled by the structuring of financial players in this area, the diversification of solidarity savings products, the nature of projects and the traceability of funds, the measurement of impacts and therefore the reliability of financial, social, economic and environmental indicators, but also in the fight against impact washing. The subject of financial inclusion is also developing, with an upward trend and a growing associated impact in several key areas of the world. The number of borrowers is also on the rise, as is the nature of borrowers, 56.9% of whom are women, making women the main beneficiaries of financial inclusion, with the gross loan portfolio and the number of borrowers set to grow to 182.8 billion dollars in 2022, up 13.7% on the previous year.

The levers that need to be activated to achieve mass deployment…

Alongside trust, which will only be achieved if the concepts of ethics and transparency become widespread, other levers will need to be activated, and the 3rd Barometer gives the players involved the chance to explain them in detail: impact measurement, which guarantees the contribution of financial players to the transformation of the real economy, links between financial players and local and regional authorities, innovative financing in social economy, impact contracts and public policies, impact in the agricultural sector, the inclusion of marginalised individuals and communities in impact research initiatives, and the fact that they are usually little involved in these processes, even though they concern them at the highest level – since it is precisely the most vulnerable groups that are most affected… These are all parameters that need to be taken into account if we are to take a holistic view of impact finance and understand the mechanisms at work.

This 3rd edition of the Impact Finance Barometer contains all the testimonies and sources so that we can collectively implement sustainable finance. 

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Created in 2008, Convergences is the first platform for reflection, advocacy and mobilisation in Europe in favour of the Sustainable Development Goals (SDGs) and the construction of a 3Zero world: “Zero Exclusion, Zero Carbon, Zero Poverty”. Its mission is to stimulate constructive thinking and action, spread best practices, and promote the co-construction of innovative partnerships with high societal impact to achieve these goals. Convergences works in various fields that can have a decisive effect in favour of its objectives: international solidarity, preservation of the planet, impact finance, Corporate Social Responsibility, social and solidarity economy, new technologies for development, etc. Convergences relies on more than 300 partner organisations represented in its Working Groups in France to co-construct the 3Zero World Forum in Paris, which gather each year nearly 4,000 participants around issues of sustainable development, to carry out studies and publications, and to lead projects around youth civic commitment with Youth We Can! and internationally to co-organize its 3Zero activities with several editions of the Forum held worldwide: Myanmar, Tunisia, Colombia, Philippines, Greece, Niger, Occupied Palestinian Territory, Guadeloupe, Mexico and Tajikistan.