FinTech has already shown its ability to disrupt and accelerate innovation in the financial system. Add one of our society’s most existential threats to the mix, and you create a surprising pairing that might just have the potential to revolutionize the way we think about addressing climate change: Climate FinTech.
Climate FinTech has clearly arrived in the mainstream. Over the past few weeks alone, we’ve seen countless headlines of companies like Citi, JP Morgan Chase, Wells Fargo, SwissRe, Zurich Insurance or BNP Paribas pledging trillions to sustainable finance and setting ambitious climate goals.
Simply put, Climate FinTech is digital financial technology that is catalyzing the decarbonization of our economy. Climate FinTech, also called Green FinTech or Sustainable FinTech, is the convergence of three sectors: Climate, Finance and Technology. Climate FinTech solutions are digital innovations, applications, and platforms that help institutions and individuals save, spend, and invest in ways that put the planet first.
The movement of capital towards decarbonization has the power to significantly impact in the fight against a global warming catastrophe. This includes increasing investment in battery technology, carbon sequestration, reforestation, renewable energy, electrification, energy efficiency and other cutting-edge carbon removal technologies.
However, according to The International Energy Agency (IEA) and International Monetary Fund (IMF) green recovery plan, roughly $3 trillion needs to be invested into these climate solutions over the next three years to achieve a 1.5 degree warming scenario... a figure more than 4 times current investment levels.
Frankly speaking, money is not moving fast enough to the solutions we need now.
Climate FinTech serves as a crucial intermediary in financial services, mobilizing capital and changing behaviour. Now Climate FinTechs enable customers to make more conscious decisions when shopping, help investors to build more climate-focused portfolios for their clients, and assist insurance firms to better analyze weather perils. They give businesses better tools to monitor, measure, and offset their impact on the planet.
Doconomy, founded in 2018 in Sweden, empower their customers with a credit card to take climate action everyday by providing transparency on daily spending. The card tracks CO2 emissions generated from transactions and lets users easily calculate and offset those emissions in a simple app.
Climate FinTech SilviaTerra's Natural Capital Exchange (NCAPX) provides a marketplace for forest carbon payments. They are pioneering a market-based, data-driven mechanism for democratizing access to forest carbon markets. Landowners get paid to change their forest management, which in turn increases the amount of carbon in the landscape.
Alipay’s Ant Forest is the world’s largest mobile game for planting trees - combining gamification with rewards on making everyday sustainable lifestyle choices. Winner of the UN’s Champion of the Earth Award, it is a mini program embedded in Alipay, China’s leading payment app. Ant Forest already counts over half a billion users and has resulted in over 122 million trees planted.
MSCI acquired Zurich-based startup Carbon Delta to help global investors more accurately evaluate risks associated with climate change and to comply with climate risk disclosures and requirements. Only one of several acquisitions of climate risk analysis startups in the past years.
Tools such as OpenInvest, provide unique portfolio insights, justification and logic as to why specific decarbonizing investment decisions are made - showing tangible impact metrics.
Startups today have a unique opportunity to take advantage of the increasing demand for sustainable financial solutions from both organisations and individuals. They are more agile, better at reinventing customer experience and solving data challenges.
Corporates will be crucial in helping to develop and scale these solutions globally.
Beyond startups and corporations, regulators and governments hold an important role to build a thriving global Climate FinTech Ecosystem. A growing number of initiatives and tangible action plans are being launched to promote both sustainable finance and Green Fintech.
In higher-level policy, the EU published its EU taxonomy for sustainable activities in July 2020, creating a framework of conditions an economic activity has to meet in order to qualify as environmentally sustainable. President Biden is expected this week to call for cutting U.S. greenhouse-gas emissions roughly in half by 2030, while pushing for massive stimulus spending for green jobs.
Country-specific initiatives are gaining momentum, such as the recently launched Green FinTech Action Plan by the The Swiss State Secretary for International Finance, with the goal of establishing Switzerland as a global leader in sustainable finance.
In addition, the Monetary Authority of Singapore announced Green Fintech as a key component of it’s Green Finance Action Plan. "FinTech in particular has great potential to be a force for good. We can bring together the power of finance and technology, to help create a more inclusive society and a more sustainable planet," explained Ravi Menon, Managing Director, Monetary Authority of Singapore.
Inertia is building, as more and more countries and regions now see sustainable finance as an opportunity, rather than an obligation.
Climate FinTech’s ultimate goal is to direct capital flows towards decarbonization.
To achieve this, we will need the collective power of startup innovation, corporate commitment, and government policy. Startup accelerators are ideally placed to help build and connect promising tech startups with the bigger ecosystem.
The strategic partnership between F10 and New Energy Nexus supports the growing number of Climate FinTech startups around the world with the first Global Climate FinTech Program.
If you are a growth-stage Climate FinTech or InsurTech startup, apply now to the F10 Acceleration program. Cohorts will be running in Switzerland, Spain, Singapore, among other regions later this year.
If you are a corporate looking to achieve Net-Zero goals while improving the services you offer to your customers and clients, or an investor looking to de-risk and advise on this paradigm shift, please get in touch through the form below.