Climate Fintech—it’s probably not a phrase you’ve heard before. If you’re outside of the financial industry, your understanding of how financial technology combats climate change might be a bit green (see what we did there?). But by the time you finish this article, you will see a natural connection between fintech and a more sustainable world.
Defining Climate Fintech
Climate Fintech is digital financial technology that catalyzes decarbonization. Or in layperson’s terms, it’s the ways in which fintech is applied toward improving the climate. In 2021, digital financial technology has been officially integrated into most aspects of life. So, it’s not completely unexpected that it would cast its net wide enough to include one of the world’s largest public policy issues—climate change.
Environmental concerns are growing. As we make changes in our lives to improve the environment—such as switching from plastic to reusable grocery bags—we expect businesses and corporations to make comparable adjustments to benefit the planet.
Financial technologies like artificial intelligence, big data, blockchain, cloud computing and much more are changing the way our world works. Now, they have the power to change the way our world thrives.
The major areas in which Climate Fintech makes an impact include consumer behavior, investments and risk analysis. It can help consumers buy sustainable products and assist them in better investment choices through analytics. These technologies are also useful to companies as they comply with environmental regulations and increase transparency, while giving consumers the needed information to support businesses that prioritize carbon accountability.
Check out some of the ways Climate Fintech is at work.
Consumer Behavior
Opting to make credit card payments or conduct banking digitally creates less of a carbon footprint than traditional methods. When you as the consumer go digital, you not only experience increased convenience, you also save on carbon emissions by not getting in your car and driving to the bank every time you have a check to deposit.
When you choose online bill paying and electronic banking statements, you are saving paper and the carbon emissions from mailing and delivering. Many businesses are even incentivizing customers to choose these environmentally friendly alternatives.
Several newer apps help consumers understand and track their carbon footprint related to specific purchases, providing insight into what they are buying.
Investments
There has been a significant shift in investment activity toward decarbonization. Lower fees, better performance and regulatory pressure are just some of the reasons for the increase in Environmental, Social, Governance (ESG) investments.
Additionally, capital is transitioning to younger generations who are more concerned with environmental issues and aim to build climate-focused portfolios.
Financial technology such as blockchain—the storage of data in blocks that are chained together—can help guide investments. With blockchain, the “history” of your money is revealed—where it’s been and what it’s done. If you can see that your investments are with companies entangled in the fossil fuel industry, you may choose to make adjustments so that your money funds renewable energy instead.
Risk Analysis
Many financial technologies allow for analysis of current and projected changes to the planet and climate. With the application of things like satellite data and artificial intelligence, information can be collected on everything from traffic patterns and greenhouse gas emissions to food production and deforestation. This knowledge leads to a better understanding of risks for economies, businesses and communities moving forward.
We’re Banking on a Cleaner Environment and an Improved Climate
Climate Fintech provides opportunities for businesses and consumers to make spending, saving and investment choices that prioritize the planet
The Partnership for Carbon Accounting Financials (PCAF) created the Global Greenhouse Gas Accounting and Reporting Standard, a uniform set of metrics that helps financial institutions calculate the carbon footprint of their loan and investment portfolio. Learn more about this initiative and the banking industry’s role in measuring greenhouse gas emissions.
At Sunrise Banks, we subscribe to a triple bottom line of people, prosperity and planet. Learn more about our social impact affiliations.