What is Climate Fintech?

Climate change poses significant economical and political threats to the global economy.

Collective efforts to alleviate such risk will require a fundamental regeneration of our global economy and coordinated action across public and private stakeholders.

Financial institutions play crucial roles. However, money is moving slowly to address the pressing climate issues we are facing now. On the contrary, fintech has shown its capacity to drive innovation and reach venture scale.

Climate Fintech is a digital financial technology catalysing decarbonisation.

What is fintech?

Fintech is the short term for “Financial Technology”. Fintech emerged in the 21st Century, the term was initially applied to the technology employed at the back-end systems of established financial institutions. As further defined by Investopedia, financial technology (Fintech) is used to describe new tech that seeks to improve and automate the delivery and use of financial services. ​​​

At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes, and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones.

Fintech captures a massive range of products, technologies, and business models that are redefining financial institutions.

Fintech refers to everything from cashless payments, online funds transfer, crowdsourcing platforms, and robo-advisors, to virtual currencies.

PayPal is one of the most vertically-integrated fintech players in the market capitalizing on the digital wallet trend. Another big player in the fintech industry is Wise. Debuting with an initial value of £8.75 billion ($11 billion), Wise has set out to reshape the international payment industry by eliminating the markups that banks and foreign currency dealers apply to transactions, allowing for inexpensive, rapid, and transparent cross-border payments. A further example is Zoho. With over 70 million users worldwide, Zoho’s 50+ products aid business owners’ sales and marketing, support and collaboration, finance, and recruitment needs – letting clients focus only on their business.

Financial Institutions and Climate Change: What is Climate Fintech?

Does technology affect climate change? The answers to this are Climate tech and Climate fintech.  Climate tech is  “Climate Technologies”. As defined by the United Nations Climate Change (UNCC), these are technologies that we use to address climate change by reducing GHGs including renewable energies such as wind energy, solar power, and hydropower. We use climate technologies to adapt to and mitigate the adverse effects of climate change.

On the other hand, Climate Fintech is a newer subsection of fintech that is combined with climate tech.

In the advanced world of online banking, gone are the days when you would need to personally go to the bank branch to print out a paper bank statement or have it mailed and deliver to your home. That means less use of paper, less consumption of fuel, and more time saved for consumers. The transition to digital is a continuing trend: as of May 2022, 93% of the UK regularly use online banking, up from 45% in 2010. 

The convenience of online banking has enabled sustainable solutions congruent with the consumers’ spending tendencies. Spending behaviour is indeed strongly linked with carbon emissions, and the conscious consumer needs to be provided with tools to come up with sustainable decisions. In addition, neobanks are also widely used by younger generations which places them in a unique position to develop ethical products which have positive environmental effects. 

Furthermore, Sustainable investing is increasingly facilitated by the proliferation of enabling platforms, including investment marketplaces for average consumers, robo-advisors, AI-driven software adopted by wealth managers and financial institutions to optimise portfolio management for carbon accounting.

The significant benefits of fintech to consumers are increased convenience, reduced carbon footprint, and more clarity in personal finance management.

CLIMATIG is specially designed to identify and alert stakeholders on the climate-related risks of their assets and to help them come up with informed decisions on how to mitigate those impacts and protect their assets. Moreover, CLIMATIG’s platform can generate detailed, accurate, and easy-to-understand commercial or residential mortgage portfolios that include climate hazards. Furthermore, CLIMATIG prioritises assets that are more resilient to extreme weather events with science-backed investment portfolios. 

Adapting to Climate Change with Fintech Solutions

According to Deloitte, the average consumer is growing more environmentally conscious. FinTech is naturally more environmentally friendly than the traditional finance sector.

Consumers are swiftly adapting to fintech because of its efficiency and convenience.

When you transfer funds online, that’s fintech. When you use Apple Pay for your purchases, that’s fintech. When you use your bank mobile app to check your balance, that’s also fintech. The global fintech market is projected to grow steadily at a compound annual growth rate (CAGR) of about 23% reaching a market size value of $324B by 2026.

Climate fintech is expected to play a vital role within a fast-growing space.

Contact us here and find out more on how CLIMATIG can help you navigate these risks.


Photo by Clay Banks on Unsplash

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