There is an emerging subsector of fintech that is starting to gain momentum: Climate FinTech. As the name suggests, this is an area of fintech that concerns itself with making a tangible difference to the environment in a positive way. Listed below are some of the ways in which fintech can help address key climate issues.
This is software that taps into open banking and allows end-users to better understand the impact their purchases and expenditures have on the environment. Carbon Accounting takes into account various data points and prevailing data trends to build up a picture of the climate impact businesses and individuals have and often provides them with unique ways to mitigate their carbon output and tools and tips to make changes to limit their carbon output going forward.
FinTechs in this space are offering ways for individuals and businesses to offset their carbon output by funding green projects and initiatives. Examples of this can include forestry and algal projects. FinTechs are operating both through direct-to-consumer interfaces and through API documentation to power other services. It can also be tied as an add-on feature for a core service or offering.
As Regulators and global bodies put frameworks and regulations in place to ensure businesses are following good practices, it has become more important than ever to track ESG requirements. ESG stands for Environmental, Social and Governance. Investors are increasingly keen to understand how their investments and portfolio companies are doing when measured against ESG metrics.
Impact Investing and sustainable banking
Increasingly we are seeing neo-banks and digital wallets launch that are tightly aligned with a climate-conscious user base. Encouraging good “green” behaviours and providing a user experience that exposes individuals to brands that share the same ethos.
There is a lot of innovation coming out of the climate fintech space and with lots of money flowing into the space, it will be very interesting to see what unique and innovative solutions appear in this space going forward.