When we think of climate change technology, the first thing that can come to mind is solar panels or electric cars. But, technology in the financial sector could play an important role in mitigating the worst of climate change. Get into fintech, or fintech,– a growing section of financial services which, using algorithms, data gateways and artificial intelligence, helps customers and business partners to manage different business transitions.
A more recent subsection of fintech is ‘climate fintech’, where technological innovation is used to meet both sustainability and financial needs. A slew of new startups, such as sustainable investing startup Norsia, fuel fast-growing markets. But traditional financial payment platforms are also joining the race to create solutions for more and more customers. demanding climate action of the financial services sector.
The financial industry is powerful, the best banks are worth hundreds of billions dollars only – serving ordinary people who need bank accounts and large businesses too. But the financial sector was built to generate profits, even if it means getting involved in risky investments like fossil fuel projects. But at mitigate climate change over time it will likely be necessary to withdraw money from high emission projects.
Well-known companies are working alongside fintech companies to create sustainability tools for their clients. In April, financial services and credit card company Mastercard partnered with Swedish environmental fintech company Doconomy to develop the Mastercard carbon calculator. The calculator shows customers the carbon footprint of their purchases across different expense categories in an app or online portal.
[Related: How to tell if your sustainable investments really are good for the planet.]
The different banks can then personalize their use of the carbon calculator by offering customers offset projects and environmental donation options to lighten part of the environmental burden of their purchases.
“Climate Technology, Climate FinTechs are really starting to emerge and have a lot of strength in this industry… I just see it picking up steam,” says Sue Kelsey, executive vice president of global consumer products at Mastercard.
To support this acceleration, Mastercard has launched a Sustainable development innovation laboratory last September to support the development of more sustainable investment options.
But fintech isn’t just about existing banks – often technology helps create new banks entirely. Neobanks or “challenger banks” are new banks that do not have a physical location and all transactions are processed online through an app or website.
“So imagine no papers, no need to get in a car, you don’t need to park, less fuel consumption and more efficiency. [a customer’s] time, ”says Anabel Perez, CEO of NovoPayment, a platform that has used its technology to help businesses build digital banking and card solutions.
Andrei Cherney, CEO and co-founder of Suction, a digital bank that uses consumer products to help mitigate the climate crisis, says it makes perfect sense for financial services to create products and change businesses to address environmental issues.
“Climate FinTech is important… money has enormous power to move the lever and the daily actions that people can take,” he explains. “The right kinds of products and services make climate action easy and automated, while still being very powerful. ”
As an online bank, Suction offers fossil fuel-free deposits, which means the money customers use in their Aspiration bank account won’t be invented in things like pipelines. And every time a customer swipes their bank card, Aspiration funds tree planting through an environmental nonprofit called Eden reforestation projects. So far, the bank has helped plant more than 49,000,000 trees to help offset emissions.
Cherney points out that while there are more solutions and discussions about sustainability across financial services, there is still a lot of greenwashing in industry. Some companies may launch sustainable projects for consumers and corporate clients or announce sustainability goals, but many global banks have still not divested from fossil fuel projects. Big banks like Wells fargo have announced efforts to become net zero, but how their investments will change remains a mystery.
“There has certainly been more and more interest in the climate community,” he says. “[Many sectors and consumers] are starting to realize that you have to follow the money as the saying goes, and of course people have rightly focused on the big oil companies and the big polluters, but who is funding that? ”