From Fintech to Green Finance: A Fintech Insider's View

As someone with 20+ years of experience in tech, I've spent the better part of my career observing and participating in the evolution of the fintech sector. I've seen firsthand how this industry has morphed and grown over the past 15 years. 

Today, I want to delve deeper into a transformative trend that's taking root in the financial landscape — the emergence and rise of green fintech companies.

Why does it matter?

In an age where climate change has become an urgent, pressing concern, one might wonder how finance, a field traditionally associated with numbers and monetary flow, has anything to do with it. 

It's a fair question given that finances and climate change aren't immediately recognized as interrelated fields. Yet, if you look closely, you'll see that the world's top fintech firms are proving otherwise every day. 

News in the fintech sphere is teeming with innovative green alternatives specifically designed to address environmental problems.

The green fintech trend has seen notable activity in the 2022-2023 period. In the first half of 2023, green fintech funding reached $1.7 billion, surpassing the total for the previous year.

This period, however, also reflected a general downturn in the fintech market globally, with total funding dropping from $63.2 billion in the second half of 2022 to $52.4 billion in the first half of 2023​​. 

Despite this decline, the green bond market showed significant growth, expected to double to $1 trillion by the end of 2022, with $435 billion in green bonds issued within that year​​.

The fact that the financial world has now turned its focus towards the environment is fascinating. This intersection of finance and sustainability, a concept that was scarcely mainstream until recently, has become one of the top priorities for many fintech companies today. 

These companies are showing us how the world of finance can make a tangible contribution to creating a cleaner, safer, and more sustainable planet.

So, what has prompted this shift towards sustainability in the fintech industry? 

There are four main reasons:

1. The mainstreaming of sustainability. 

Today, sustainability is not just a buzzword but a way of life for many people worldwide. There's an increasing number of people becoming conscious consumers who choose to live in a more eco-friendly way. 

These individuals want their financial service providers to reflect their values. They're looking for companies that not only provide exceptional financial services but also prioritize and promote sustainability.

2. The competitive edge. 

As it turns out, being eco-conscious can give companies a significant advantage over their competitors. Various studies indicate that about two-thirds of clients expect their bank to move towards eco-friendliness. Moreover, half of these clients are ready to switch their bank if they don't see progress in this area. 

In this increasingly competitive business environment, companies that ignore the need for sustainability risk losing their customers to more environmentally conscious competitors.

3. Regulatory influence.

There's also a growing push from regulatory authorities for fintech companies to adopt financially sustainable policies. This push is aimed at reducing greenwashing, a practice where companies give a false impression about their products' ecological impact. 

Governments and regulators worldwide are implementing stringent rules to ensure that companies are honest about their environmental footprint and are making genuine efforts to reduce it.

4. Future proofing. 

Lastly, concerns about global warming, pollution, loss of biodiversity, and ozone layer depletion transcend the business world and the pursuit of profit. Many companies are realizing this and voluntarily contributing to the fight against climate change. 

They understand that their long-term survival depends on a healthy planet, and so they are investing in sustainable practices that will ensure a brighter future for all. 

To truly understand the potential of green fintech, it's essential to look at some of the companies leading the charge.

Aspiration: A US challenger bank, Aspiration, is a prime example of how fintech can contribute to environmental conservation, and it's a case that DashDevs has been proud to be part of. Our experience with green companies, as exemplified in our work with Aspiration, has been both rewarding and enlightening.

The bank channels its funds into eco-friendly projects, demonstrating a commitment to the environment and a clear departure from the traditional banking model. Notably, Aspiration refrains from investing in oil corporations infamous for their negative environmental footprint.

My agency and I had the honor to collaborate with Aspiration in the development of their tree-planting initiative. In this project, every customer transaction triggers the planting of a tree. While each tree might seem like a small contribution, collectively, they mark substantial strides towards carbon reduction.

Tred: A fintech company based in the UK, Tred, has launched the country's first green debit card. This card, made from recycled plastic, enables users to track their carbon footprint directly from an app. 

The app calculates the carbon dioxide emissions associated with everyday purchases, offering users a tangible way to understand their environmental impact. But Tred doesn't stop there. Each time a customer makes a purchase, the company uses the profits to plant trees, thereby offsetting the carbon emissions linked to the purchase​.

Clim8: This company is making strides in the investment sector, helping clients grow their savings while protecting the environment. Clients can invest in a diverse range of environmental projects, all aimed at combating climate change. 

Whether it's clean water, energy, technology, sustainable food, smart mobility, or the circular economy, all investments made via Clim8 are directed towards achieving the goals set by the UN Paris Climate Agreement​.

Trine: A leading fintech company based in Sweden, Trine allows its customers to earn a profit while making a social and environmental impact. The company focuses primarily on solar energy, and their efforts have so far been impressive.

Thanks to the investments made by Trine's customers, over 2.5 million people now have access to electricity​.

PensionBee: PensionBee is a fintech company that's helping individuals take control of their retirement. In 2020, the company launched its fossil fuel-free investment plan, which is intended to stop financing oil, gas, coal, fossil fuels, tobacco businesses, and weapons manufacturers. 

Instead, customers' funds are invested in companies whose values align with the Paris Agreement​.

What Green Finance trend means to fintech businesses

The rise of green fintech is a testament to the power of innovation and the potential for industries to evolve in response to global challenges. The examples above not only demonstrate how businesses can contribute to environmental sustainability but also highlight how consumers can play a part in driving this change.

By choosing to bank with Aspiration, invest with Clim8 or Trine, or plan their retirement with PensionBee, consumers are sending a strong signal to the financial sector about their desire for more sustainable options.

Green fintech is not just a trend; it's the future of the financial sector. As we move forward, we must remember that our financial decisions have the power to shape the world around us. 

By choosing to invest in sustainability, we are investing in our planet's future, and that is the greatest investment we can make.