FinTech Interview Series: Tim Fright from Climate Friend

Climate Friend is a green digital asset manager that is passionate about making it easier for people to align their financial investments with their personal values. We are a software platform that enables investors to be both socially responsible and generate competitive returns. We do this through understanding people’s attitude to risk, and their ethical and environmental preferences, and map their responses to a risk-managed investment universe that enables them to invest in low-carbon and/ or ethical actively managed funds and ETFs. We have developed an algorithm using Hedge Fund style analytics and Big Data to create an Environmental Social and Governance (ESG) framework that can offer responsible investing with superior risk-adjusted returns and thus help in the fight against climate change.

Summary

Looking at average temperatures from Jan-June since 1918 the 4 hottest years of the last hundred have been 2015, 16, 17, 18. As average temperatures increase the extremes become less extreme. Yet how we invest - and who we invest in - can have a critical role in delaying the worst effects of climate change.

Tell us about yourself

I’ve a background in tech, government, and philanthropy and was lucky enough to be involved in an Antarctic expedition, which in part looked at the effect of climate change on the Beardmore Glacier. Since then, I’ve co-founded a responsible investment FinTech startup with classmates from Cambridge University having completed my MBA at the Judge Business School.  

Why the focus on responsible investing and Antarctica?

The climate in the Antarctic Peninsula has warmed by 3°C meaning that once stable ice shelves are now retreating. Since the 1950s this is a loss of 25,000 km2 of ice shelf, contributing to rising sea levels. Climate change has potentially catastrophic consequences for us all, but the levels of awareness amongst investors (millennial investors in particular), and thus the opportunities to avert disaster, are increasing.

The Association of the Luxembourg Fund Industry and Deloitte (2016) note that half of assets under management by 2030 will belong to millennials and those in the so-called ‘Generation X’. How they put those assets to use will be critical. According to Morgan Stanley research, 86 percent of millennials say they are interested in socially responsible investing. Millennials are also twice as likely to invest in a stock or a fund if social responsibility is part of the value-creation thesis.

After the UK, what are your most attractive markets?

Climate Friend is built to go beyond the UK, and we are looking in particular at the European market which is leading in this area, and the Japanese market where we are seeing a number of exciting developments. In fact, we were fortunate enough to be selected by the Department for International Trade to take part in the FinTech Trade Mission to Japan in September and continue to maintain close links there with a view to a possible Tokyo office later next year.

How is the sector changing?

If you look back to the 1980s socially responsible investing was focused on screening out certain companies or sectors that you didn’t like. This approach has evolved to focus on what’s known in the industry as “ESG” or “Environmental, Social and Governance” criteria. This move is more ethics-agnostic in that it looks at factors like for example a company’s board diversity, carbon emissions and employee relations, and is designed to help investors get a more granular feel for a company’s performance. Index providers are now providing a number of ESG-focused indices and ETF-providers are following this trend meaning that it has become easier for individuals to   

Who are the other FinTechs out there who you admire?

I’m a big fan of Revolut – the way that they’ve looked at something that people take for granted, reimagined it, and grown quickly, is very inspiring.  

What are the biggest regulatory issues you face?

In the UK and Europe, Brexit is an ongoing concern in terms of uncertainty, especially while the European Commission have developed a series of regulatory proposals designed to enhance green finance and responsible investment in the EU.