Digital options for voting at AGMs and participating in banking services can increase participation in those areas and help companies work towards the UN Sustainable Development Goal (SDG) of financial inclusion.
Sustainable Development Goal 8 explicitly focuses on financial inclusion – measured by the number of ATMs accessible to the public, and the share of adults with accounts with financial institutions and mobile operators – but financial inclusion is a key factor that can drive impact within a whole range of SDGs.
Sophie Demaré, ESG & engagement officer at Federated Hermes, says the banking and telecommunications sector is uniquely positioned to have a positive impact on socio-economic well-being and focus on the UN Sustainable Development Goals.
Demaré said: “A bank account is an essential means of achieving the results of a wide range of the UN SDGs, acting as a lifeline in times of crisis and as a vehicle for social mobility.”
However, according to data published this year by the World Bank, there are still 1.4 billion adults excluded from the global financial system today.
The poorest are typically hit hardest, due to a lack of access in rural areas, cost barriers that banks face in making smaller loans, and insufficient customer education about personal budgets and finances.
Impoverished households rely heavily on cash and physical assets, such as livestock, for financial stability. During health emergencies or natural disasters, they lack a buffer to sustain their livelihood.
Without access to capital, they also struggle to get out of poverty by starting a business, getting an education or moving to access a better job.
Mobile banking offers a solution: two-thirds of unbanked adults own a mobile phone, and in many places digital financial services have stepped in to offer resources traditionally offered at brick-and-mortar banks through digital channels tailored to people with mobile access.
To mobilize this, an important ingredient is needed: a mobile network connection.
During a virtual campfire hosted by Open Banking Excellence in January on the issue of open banking in Brazil, Luana Soratto, head of open finance use cases at Brazilian payment app PicPay, said: “We are a developing country, and even before we talked about it the unbanked, we need to talk about the digitally excluded.
“It is very difficult for someone to be included in the financial system without being included in the digital environment. And today that is 15% of the population.”
Banks are stepping up their commitments to expand their customer base to disadvantaged groups. In 2021, 28 banks committed to setting goals to make credit more accessible, increase financial literacy and combat over-indebtedness through the Principles for Responsible Banking’s Commitment to Financial Health and Inclusion.
Demaré of Federated Hermes said: “Banks are relying on telecommunications providers to expand connectivity to underserved areas of the world to better deliver on the promises of financial inclusion, extending their reach to more of the 2.3 billion people without internet access in 2021.”
In some cases, telecommunications companies eliminate the need for a bank entirely by offering their own secure, trusted mobile money services, requiring only a mobile subscription.
Demaré said: “We recognize the role of financial inclusion as a catalyst for progress on a wide range of SDGs, especially for vulnerable members of society.
“To this end, we regularly engage with banks and telecommunications companies to understand how financial inclusion can form a strategic and expansive part of their business strategies.”
Digital AGM voting
For those who have already established a foothold in wealth creation, digitalization can also help them become more involved in the governance of the companies they invest in, further increasing financial inclusion.
Almost nine in ten private investors in investment companies have rarely or never attended an annual general meeting (AGM), according to research from the Association of Investment Companies (AIC) this year.
The most common reason for non-attendance was the inconvenience of traveling to AGMs. This reason was chosen by 59% of those who said they never or rarely attended. Another reason given was that there was no time to attend (27%).
But almost two-thirds (65%) of all respondents said they would be more likely to attend AGMs if there was an option to attend online.
Annabel Brodie-Smith, communications director at the AIC, said: “Along with voting, AGMs are an important way for shareholders to make their voices heard and exercise the democratic rights they have as investors in investment companies.
“Our research shows that the main reasons for not attending AGMs are practical reasons – a reluctance to travel or save time – rather than just a lack of interest.”
Around a third of investment companies now offer the option to attend their AGM online to increase participation. The AIC website lists the upcoming meetings of each affiliated investment company, including General Meetings and shareholder presentations.
With many platforms now offering their customers the ability to vote their shares online, 20% of survey respondents said they vote their shares often, 15% vote their shares sometimes, 25% rarely and 35% never.