What do you get when you combine the buzziest tech sector with the most high-profile public policy issue? Financial technology combating climate change.
It would seem an unlikely pairing, but the last year witnessed an explosion in climate-focused fintech products and companies. The public’s focus on climate change is here to stay, which could continue to spur more exciting innovation in financial services focused on creating a greener world. It remains to be seen whether these products can generate a meaningful return (and thus merit continued investment), but this will be a common theme over the next year and beyond.
How does one combine a financial product with climate technology? There are many examples.
Stripe recently launched its climate removal tool – Stripe Climate – which lets online businesses redirect some of their proceeds towards four emerging technologies focused on reducing carbon footprints. (The tool is now global, and over 100 companies in Europe have signed up.) The kit also lets companies tout their climate credentials to customers – something that may become increasingly important in shopping habits.
Climate is also becoming a more popular investing habit. Cooler Future, a Finnish fintech, is building a retail stock investing app focused on climate impact. Trine lets its users invest in clean energy in emerging markets. Carbon Collective is a roboadvisor that builds portfolios with a low climate impact.
No fintech trend would be complete without its own neobank subset. Atmos Financial claims to offer a bank savings account “engineered to reverse the climate crisis” from clean energy investments made with deposits. Carbon Zero, which “takes a car off the road for a day for every $10 you spend,” donates part of its credit card interchange revenues to carbon removal and helps cardholders track their carbon footprint. Aspiration lets users round up their purchases to the nearest dollar, and plants trees with the change.
Not to be outdone, banks and legacy financial services players are making their own climate commitments. The American Bankers Association is pushing principles for transitioning to a low carbon footprint economy (conveniently timed with a US transition in government…) Goldman Sachs GS +1.8% joined an open source climate data initiative. The Treasury and the European Central Bank are setting up their own centers to focus on climate change. The UK government is spending £10 million to create ‘green finance’ hubs in Leeds and London. New Energy Nexus recently compiled 100 interviews into a report that shows financial institutions making comprehensive strides into mobilizing more capital in the pursuit of reducing greenhouse gas emissions.
The big question will be: can these firms make money? Is there a sustainable edge to enabling investment in climate-focused financial technologies now? Silicon Valley is no stranger to getting burned by cleantech, which is apparently making a comeback. To demonstrate that offsetting climate change is a reliable, profitable business strategy – and not just a PR opportunity – it will be important for these products to perform at least as well as comparable ones without the green features.
Regardless, it is exciting to see so many products built for user financial health begin to combine with those built for a more sustainable future. Expect to see more innovation in this area over the next few years.
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