Riding the Digital Wave: Deciphering the Relationship of Fintech Adoption and Sustainable Finance in the ESG Era

Abstract

Fintech, which stands for financial technology, refers to innovative technologies and platforms that change traditional financial services, such as mobile banking, digital payments, and robo-advisors, to increase efficiency and accessibility. The number of active internet users can serve as an indicator of fintech adoption, reflecting the increasing utilization of online platforms and digital services for financial transactions and activities.
Sustainable finance refers to financial activities that incorporate ESG considerations into investment decisions, intending to generate long-term value while also contributing to environmental and social goals such as climate change mitigation, social equality, and responsible corporate governance. Assets under management (AUM) in ESG funds serve as an indicator of sustainable finance by reflecting the allocation of capital towards investments that consider environmental, social, and governance criteria, contributing to long-term sustainability goals and responsible investment practices.

This research paper seeks to establish a link between Financial Technology (Fintech) and Sustainable Finance by using the number of active internet users as a Fintech indicator and AUM in Environmental, Social, and Governance (ESG) funds as a Sustainable Finance indicator. Data from a secondary reliable source, covering the years 2019-2023 is used for analysis. Python programming is used to run correlation analysis and t-test to determine the statistical significance of the relationship between the two variables. The findings indicate a strong positive relationship between Fintech and Sustainable Finance, showing Fintech's expanding influence on the adoption and promotion of sustainable investment practices.

The study emphasizing the significant correlation between fintech and sustainable finance is aimed to provide management with valuable insights into how technological innovations influence sustainable investment decisions, guiding strategic planning and resource allocation to promote environmentally and socially responsible financial practices.