Climate FinTech - are you missing out on the next big FinTech investment?

With COP27 just having just been concluded in Egypt earlier this month, there is a renewed spotlight on climate change. For the first time, the wealthier nations have agreed to set up a fund to provide relief to the developing countries who often suffer the most from the climate change-related natural disasters caused by emissions from those same wealthier nations. Though it may take a few years to take effect, it is a triumph nonetheless for these smaller nations.

On the payments side, there is an emerging innovation which merges climate-related issues, finance and digital technology, often referred to as climate fintech. Climate fintech startups are getting lots of attention in the form of funding. These fintechs are centered around a few key areas, the largest of which focuses on carbon offsetting, where a company may purchase carbon credits in an effort to offset their own carbon emissions. The areas, however, that are garnering the largest amounts of funding are carbon accounting and climate risk management, with hundreds of millions of dollars supporting these fintech startups. Carbon accounting refers to the technologies used to calculate a company’s carbon emissions. By also assessing the company’s supply chains, one can calculate the company’s entire carbon footprint. Climate risk management refers to predicting the risk a company may face due to extreme weather caused by climate changes. It can include satellite monitoring, climate projections and insurance products.

There are two categories of climate fintech that speak directly to payments. The first is climate crypto. Climate crypto attempts make the counting of carbon credits more accurate and transparent, by tokenizing the credits on blockchain in an attempt to prevent double counting of credits. Other crypto programmes may reward tokens based on climate friendly company initiatives. The second category is impact investing and sustainable banking, which make it simpler for people to invest in sustainable projects, either via investing in climate-related stock portfolios or via the bank itself investing customer deposits into the sustainable projects.

Climate fintech carves out opportunities which use the financial sector and associated digital transformations to benefit the planet. Financial technologies and innovations are able to create links between climate driven startups and programmes and the funding they need through easier access to both traditional and non-traditional financial institutions. It is an exciting time for fintech and is arguably one of the most beneficial technology disruptions yet!

If you are looking for help with the payments aspect of your company, we have a super experienced team of experts who can guide you in the right direction and help to support your project. Contact us to see how we can assist.

Sources and further reading:

https://www.greenbiz.com/article/exciting-intersection-fintech-and-climate-tech

https://sifted.eu/articles/what-is-climate-fintech/

https://www.fintechfutures.com/2022/08/the-role-of-the-payments-industry-in-saving-people-and-planet/

https://www.reuters.com/business/cop/key-takeaways-cop27-climate-summit-egypt-2022-11-20/