Game Changer: Katherine Foster (United States)

In Fintech, Game Changers 16 by Mary Kurek

Katherine Foster is CIO of the Sustainable Digital Finance Alliance a public-private partnership between the UN Environment Program and Ant Financial Services Group, and partner to the UN SDG’s Task Force for Digital Financing of the Sustainable Development Goals. Katherine has been spearheading initiatives at the nexus of innovation, policy, and sustainable development for over 25 years. A former Canadian diplomat specialized in human security and climate, she began building out initiatives in Europe including as Innovation Lead in Switzerland and then Business Development Lead for the EU’s Climate-KIC, accelerating 1000 startups and 300 innovation partnerships globally.  She has also served as a lecturer at several universities, an advisor and judge with the UNDP Accelerate2030, the Ashoka Changemaker Program, NESTA UK, the MIT IIC, and the EU EIT Food, as an expert to World Bank’s Blockchain Carbon Markets Pilot, and as CSO to BLOC and Maritime Blockchain Labs, and MIT Solve Fellow. Katherine focuses on harnessing emerging technologies for sustainable finance.

Katherine Foster speaking – Science Technology Park, Belgrade

Q & A with Katherine:

Q:  You’ve mentioned that the Sustainable Digital Finance Alliance (SDFA) was really a (nonprofit registered in Switzerland)  that came about through the World Economic Forum. Can you give more details about the problems that were identified then that needed addressing in this way? 

A:  Financing Climate and Green SDGs is a significant challenge and impact investing, conscious capitalism, sustainable investment, and ethical investment have emerged along with higher demand for financing opportunities. The UN Global Goals have become a guideline for the performance of these newer types of investments and fintech offers the prospect of a more efficient, accessible and less vulnerable financial system to meet these financing and investment gaps. The inquiry into the design of a sustainable financial system was initiated by the United Nations Environment Programme (UN Environment) “to advance policy options to improve the financial system’s effectiveness in mobilizing capital towards a green and inclusive economy—in other words, sustainable development.”

The Sustainable Digital Finance Alliance (SDFA) was co-founded at the World Economic Forum in 2017 by UNEP and Ant Financial (the affiliate of Alibaba Group) which has planted over 100 million trees through its 500 million App users). My colleague and I co-lead the SDFA which we have registered as a not-for-profit in Geneva, Switzerland, and have already launched a series of key knowledge pieces (official partner of the UN Task Force), initiated a network of three international hubs piloting a guide to green fintech, and are working with our partners and significant ecosystem to scale up Ant Forest related or inspired initiatives in forestry and biodiversity. The Alliance focuses not only knowledge generation (including key reports and guidelines), but also in sparking innovation and collaborative action.

Q:  Please tell us about Ant Forest and the Alliance’s relationship?  Are there impact #s as yet or anticipated impact?  

Katherine Foster: A J Stream

A:  In January 2017, Ant Financial Services Group became the first Fintech company to join UN Environment Programme Finance Initiative’s network of more than 200 financial institution signatories. At the World Economic Forum in 2017 the UN Environment and Ant Financial Services launched the ‘Green Digital Finance Alliance’ to harness digital technologies in catalyzing financing that addresses global environmental challenges.

Founded in 2014 and originating from Alipay, the world’s leading third-party payment platform, now has over 500 million users of its mobile and online financial services in China. The app provides its users with the means to benchmark their carbon footprint, generated through algorithms of their financial transaction history, and to earn ‘green energy’ credits for reducing their footprint. Ant Financial integrated this into a social media experience and a complimentary tree-planting carbon offset program which has to-date planted over 100 million trees in the country’s deserts  (nearly 1.4 million mu – about 93,300 hectares) of forests have been planted as part of a nonprofit project to combat desertification and promote a low-carbon lifestyle started by Ant Financial. 

Q:  You’ve mentioned that one of the missions of the Alliance is to promote the greening of fintech and how you are mapping the green landscape with 3 new hubs.  Can you explain what is involved in doing that and the result that is desired?

A:  We have just begun in July signing on three initial hubs to pilot a guide to mapping the green fintech landscape (Switzerland, The Netherlands, and Ghana) to determine advances and challenges and which will also serve to bolster these ecosystems on the ground.

Q:  When do you anticipate the Alliance will measure its own impact and how might the information be shared?  

Katherine Foster – Johns Hopkins Panel

We have already produced a number of key reports, are participating in or leading key initiatives including one that will be launched on September 24th during Climate Week. We are also the official knowledge partner of the UNDP Task Force on Digital Financing which consists of leaders from a range of sectors from both developed and developing countries.

Our work will focus on offering the means of mapping out this landscape to address the barriers, providing guidance and recommendations to key stakeholders, as well as partnering with financial industry and corporate initiatives. Our approach will be measured not just on the knowledge pieces and recommendations we publish and share with the ecosystem, but with the robust development of indicators as well as pilots. Our operation is very lean (1.5 full-time staff with NGO budget) so success will also mean increasing our capacity and partnerships.

Hot off the Press

For Immediate Release

SDFA and HSBC  Launch Pivotal Report on Unlocking Climate Finance
By Scaling The Green Bond Market Through Emerging Technology

Date:  September 23  2019

New York  – The Sustainable Digital Finance Alliance (SDFA) along with HSBC Centre of Sustainable Finance launch the report: “BLOCKCHAIN Gateway for Sustainability Linked Bonds: Widening access to finance block by block”. The report outlines how emerging technology can enable the green bond market to scale dramatically from a mere 2% of the current trillion-dollar bond market, unlocking capital for solutions to meet the Paris Climate. The Report quantifies the efficiency gains to be harvested from digitisation, shows current state of the digital green bond market, provides a toolbox and key recommendations, and offers a glimpse into a future where green bonds become accessible to anyone to issue and to invest.  

The reporting burden associated with use of proceed bonds, such as green bonds, is set to soon diminish or entirely disappear. The report thereby points to a future where the current reporting burden is alleviated to make the bond market far more efficient and accurate.

Zoë Knight, Head of the HSBC Centre of Sustainable Finance said “The urgency to provide finance that delivers a net-zero economy is increasing. Exploring how technology can accelerate financing for low-carbon solutions is critical for speeding up the response to climate change. This report with SDFA provides a roadmap of the benefits of blockchain”.

Emerging technology including Blockchain (DLT) offers the ability to digitise trust by using mathematical algorithms and cryptography to validate transactions. It can step into the bond market to take over the role of trust broker, making it easy to reduce the overall costs of bond issuance and impact the minimum coupon size. For bonds on the blockchain there will be no difference in costs between a 10 dollar and a 10 million-dollar investment, which would have the effect of opening up the Green Bond market to a wider investor base and makes small scale investment by individuals viable.

Blockchain offers these advantages to all types of bonds, but recent developments at the technological frontier present even greater opportunities to Green and Impact Bonds, leading to the potential for Green Bonds to lead the transformation. The report shows that blockchain is not developing in isolation but is converging with both the Internet of Things (IoT) and Artificial Intelligence (AI).

Marianne Haahr Director of the SDFA explains: “We are increasingly living in a world where data about green assets, such as clean energy produced by a solar cell, can travel directly from the roof of a house to the digital wallet on the smart phone of a green bond investor without the involvement of human hands. Investors can get real time information; they can invest smaller amount and can thereby put more savings in a green future rather than letting in bank accounts with no or negative interest rates”.

Current state of the DLT Green Bond Market

Since early 2018, several financial have issued bonds and other debt products using blockchain technology, primarily for structuring, issuance and asset transfer. The report launched today shows how blockchain technology has been used in bonds to date. In addition, the report considers the potential for blockchain to establish credibility on Use of Proceeds and Proof of Impact. 

Banks and Regulators are key to driving the change

“Corporations, central banks, politicians and the public know we have an urgent challenge.  Financial institutions and regulators have been driving the adoption of emerging technologies in capital markets and can be critical players in rapidly accelerating the flow of capital into critical projects to address and reverse the impacts of climate change, especially in the countries at the frontier of the struggle.”  noted  Lead Researcher Sofie Blakstad, SDFA Sustainable Fintech Expert, CEO and co-Founder, hiveonline.

10X Efficiency Gains 

Moreover, the report finds that blockchain can offers to harvest efficiency gains of more than 10X the non DLT bond process with the largest efficiency gains (as money saved) in Green Bond reporting, brokerage and sales as well as structuring, price setting and risk rating. The report concludes that in addition to efficiency gains, digitising Green Bonds with DLT opens up for transformational follow-on innovations.

A Future of ‘Do It Yourself’ Green Bonds

The report points to a near future where DLT paves the way for “Do it Yourself” green bond platforms, which allow issuers to create their own DLT Green Bonds at low cost. That means smaller entities such as medium-sized businesses or neighbourhoods can issue their own Green Bonds without the need for costly full-service offerings by banks. It will allow the trillion dollar worldwide locked up in savings to be invested in a green future.

Countries stepping into a DLT future

The report points to the countries most prepared for blockchain based Green Bonds, as a support for those considering issuing them.  As of Q3 2019, just over USD 1 billion has been raised via Security Token Offerings, a number dwarfed by global bond markets at 100 billion. The market has been driven by the UK, USA, Switzerland, Germany and Estonia.

The report launched today is the product of a collaboration between HSBC Centre of Sustainable Finance and the Sustainable Digital Finance Alliance.

 Read the full report here:

 Watch the introductory  video here:

About the Sustainable Digital Finance Alliance

The Sustainable Digital Finance Alliance (SDFA) is a unique public private partnership co-founded by UN Environment and ANT Financial Services to leverage digital technologies & innovations to enhance financing for sustainable development.  The SDFA catalyzes market innovation and policy action that leverages digital finance to, on the one hand, address the barriers to scaling sustainable finance, and on the other hand, promote innovation that unlocks sustainable investments in the real economy. The SDFA is a not-for-profit organization registered in Switzerland.

Katherine’s Networking Interests:

  • Corporates and financial institutions interested or already involved in climate action and innovative green finance. We would be interested in guiding new pilots and initiatives through collaboration and consortium building around key barriers many of these stakeholders are facing
  • We want to connect standalone solutions, link and scale these including through new investment models and policy shifts
  • Foundations interested in investing in and scaling up green technology and climate solution through lean demonstrator initiatives backed up with finance and policy work
  • International and national policymakers and government representatives involved in shifting the regulatory space