Green fintech
What is going on?
This will lead to a 2.7°C temperature increase by the end of the century, rather than 1.5°C, as established in the Paris Agreement. In response to the acceleration of climate change, governments are adopting programs to achieve carbon neutrality, manufacturing is changing gear, and financial institutions and retail investors are becoming increasingly supportive of green projects.
Kearney’s research showed that 25% of users are willing to switch to banks with higher ESG priorities. It has become important for people to place their funds in green, eco-friendly banks: 40% of the respondents want to be sure that the bank does not invest their savings in companies that pollute the environment. The fintech industry is promptly responding to this request.
What will happen next?
Scenario 1
Green fintech will become mainstream in the next three to five years. Regulators and society will demand that ESG resilience parameters become an integral part of scoring and lending models, i.e., directly influencing financing decisions. Investors will support the new fintech direction.
Scenario 2
Green fintech will remain a feature within open ecosystems. The ESG agenda will focus on more fundamental issues like reducing energy consumption, ensuring responsible consumption, and switching to renewable energy sources.
Limitations
Market opacity
At this stage, it is impossible to track the actual results of ESG products and whether companies stick to their commitments.
Investment size
Creating financial ESG products is expensive.
Conservative thinking
Not everyone is ready to give up investments in oil and gas and other industries or, for example, energy-intensive mining.
Sensitivity to reputational risks
Due to market opacity, if some participants are caught lying, it can undermine the credibility of the entire ESG segment of fintech.
Disappointment in investment appeal
The ESG business may fall short of investor expectations, causing a decline in funding.
Use Cases
ESG reporting
A growing number of platforms are helping users choose greener products and services and reduce their personal carbon footprint. Such calculators often become an additional option within banking or BNPL applications.
Automated carbon neutralization
Fintech companies are building carbon deductions into their payment solutions. After every transaction, a portion of the funds is automatically sent to ESG causes.
Green investments
There is rapid development of platforms offering ESG investments, as well as alternative B2B lending for this sector.
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