Green Financing with Climate FinTech

Mar 3, 2022
4 minutes Read
Leveraging climate fintech for impactful sustainable financing, driving forward the essential evolution of the global green economy.
Green Financing with Climate FinTech

Sustainability and the green economy are fast becoming priority issues for consumers, businesses and governments around the world, but climate initiatives need support, incentives and major financing. The will is there, but where will the money come from? An answer is emerging from newest areas of the financial services sector. FinTech already uses new technology like digital payment, automation, data analytics and machine learning to reimagine banking and investing for customers around the world. Now it’s focusing its tools and ingenuity on positive change in the environmental space. Introducing: Climate Fintech.

FinTech that Puts Sustainability First

While FinTech sits at the intersection of finance and technology, its new, sustainable subset adds climate to the mix. Climate FinTech – also called Green FinTech or Sustainable FinTech – is digital financial technology that supports the greening of our economy. When organizations and individuals use Climate FinTech apps and platforms to save, spend, or invest, they’re helping to lower greenhouse gas emissions, reduce our reliance on fossil fuels, and promote the protection of natural areas and reforestation. Climate FinTech takes digital financial innovation and puts it towards sustainability.

Green Policy and Investment

Making meaningful impact on a global scale requires an entire ecosystem of actors – not just innovators and investors, but legislators as well. Governments have a major leadership and regulatory role to play alongside startups and corporations. Thankfully, many countries have or are developing policy initiatives that support and facilitate green economic activity.

In July 2020, for instance, the European Union published a taxonomy for sustainable activities, which created a framework for measuring whether economic activities were environmentally sustainable. In the United States, President Biden has called for a 50% reduction in greenhouse-gas emissions by 2030, and is pushing for major spending on green jobs. The Swiss State Secretary for International Finance has developed a Green FinTech Action Plan that aims to create a network of sustainable FinTechs and show leadership in innovative and sustainable finance. The Monetary Authority of Singapore announced Green Fintech as a key component of its Green Finance Action Plan.

With the liveability of our planet at stake, it’s encouraging to see commitments and initiatives coming from all directions. Momentum is building. While the clock is ticking on climate, the green economic ecosystem is emerging as a powerful and optimistic force for change.

A World of Green Possibilities

Climate FinTech puts sustainability into people’s hands. It leverages the power and convenience of FinTech to help individuals and organizations make spending, saving, and investment decisions that help the planet. Every step counts, and Climate FinTech turns small or even automated financial transactions into long-lasting climate-positive actions, such as planting trees or making loans to sustainable energy solutions.

Ready to see Climate FinTech in action? Here are some examples that are already having an impact:

Doconomy: an Swedish impact-tech startup and app, founded in 2018, lets customers take everyday climate action when they use a credit card. The card tracks and calculates CO2 emissions generated from transactions and provides tips on lowering emissions. The company also provides cloud-based impact calculators as business solutions.

Mastercard Carbon Calculator: in partnership with Doconomy, this app shows customers the carbon footprint of their purchases. Customers can choose personalized options to offset the impact of those purchases through environmental projects and donations.

To support more sustainable FinTech, Mastercard also recently established the Sustainability Innovation Lab in Stockholm, a global research and development center for climate conscious digital products and solutions.

Alipay’s Ant Forest: the world’s largest mobile game for planting trees, and a mini-program embedded in Alipay, China’s leading payment app. It combines gamification with rewards for making daily sustainable lifestyle choices. Half a billion players have come together to plant over 122 million trees. It’s no wonder the game won the UN’s Champion of the Earth Award.

Carbon Delta: a Swiss FinTech startup that focuses on climate risk analysis. It helps global investors evaluate climate change-related risk, meet climate requirements and navigate risk disclosures.

Aspiration: a FinTech challenger bank whose deposits and investments are fossil fuel-free. When customers swipe their cards, Aspiration funds Eden Reforestation Projects, a non-profit tree planting initiative, to offset emissions. Aspiration customers have helped plant over 49,000,000 trees.

Cooler Future: an climate impact investment app that helps users build sustainable portfolios and tracks emissions impact alongside financial returns.

Trine: an investment app committed to clean energy solutions that lets users make loans to sustainable businesses in emerging markets.

Carbon Collective: a roboadvisor investment platform that helps users build diverse portfolios that support companies developing zero-carbon solutions.

As customers throw their weight behind green financing, they’re sensitive to “greenwashing” by financial organizations that talk about sustainable investment, but haven’t divested from fossil fuel companies. Instead, many are following the money and shifting to banking alternatives that exclusively support green ventures and are green by design. Many upstart “challenger banks” or “neobanks” are already a step ahead of legacy competitors simply by virtue of being online. There’s no driving and no fuel to burn, no parking, and they’re fully paperless.

Meeting the reduction targets necessary to prevent irreversible climate change risk is going to take coordination and commitment. Startup Climate FinTech initiatives, corporate leadership and government policy support are all necessary to build a global financial ecosystem that puts the planet first.