Climate Fintech: A new class of products and services for consumers to support the clean energy transition

By GreenPortfolio Team

February 23, 2021

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What is Climate Fintech?

New Energy Nexus recently released its first review of global Climate Fintech which it defines as “digital financial technology which catalyzes decarbonization”. GreenPortfolio finds itself within this ecosystem – covering the portion of the market that is accessible to the general public. Even though GreenPortfolio only focuses on products available for retail consumers, it is helpful to see the broader ecosystem as products are introduced in this market.

New products and services for a new market

In recent years, both consumers and corporations have become increasingly interested in reducing their carbon footprints and mitigating the risks of climate change. To do this, they are seeking out new products and services across the financial spectrum. New Energy Nexus breaks the market down into eight different verticals: Payments, Banking, Lending, Investing, Trading, Risk Analysis, Insurtech, and Regtech. Many of the products and services listed – lending for renewable energy projects, green bonds, and funds – are all offerings GreenPortfolio researches and reviews to make accessible to everyone.

 

As the report notes, climate fintech innovation is a globally growing field. In fact, the majority of companies and businesses observed by New Energy Nexus are currently outside the United States. Europe in particular seems to be the most welcoming environment from both a cultural and regulatory standpoint. New Energy Nexus estimates that 43% of climate fintech companies are in Europe with only 32% coming from the US.

Geographic Trends

The report also discusses how new products and services are being developed as technologies combine and intersect these financial categories. New Energy Nexus finds that the coupling of Big Data, AI, Blockchain, Internet of Things, and Cloud Computing with financial products focused on climate change opens up a variety of new services – making it even easier for individuals and companies to address climate change in more efficient and effective manners.

Business Models

GreenPortfolio had a chance to speak with Aaron McCreary, one of the lead authors of the report, to get his take on current and future global trends within the Climate Fintech space:

Is there a particular field where you see a lot of activity or room for growth?

There is a ton to be excited about in this space. From the retail banking side, it's clear that there are a lot of "sustainable consumer solutions" being developed. These include spending tracking applications like eCountabl which help consumers monitor the impact of their daily expenditures, solutions like ClimateChain which give consumers rewards for shopping with green companies, collaborations between Mastercard and Doconomy to provide credit cards with carbon caps, offsetting cards like this one from Aspiration, as well as monthly subscription offsetting services like Wren. There are tons of digital wallet and green banking solutions popping up as well, such as Atmos and Tomorrow.

 

How important do you think it is to get regular Americans engaged with Climate Fintech?  

Crucial! The US is already home to powerhouse innovation hubs, massive capital resources, and a lion's share of Fintech success – so if the narrative can change around climate there is huge potential. You are seeing this shift take form a little bit more every day now; it's really exciting. The policy changes we see from Biden help set the tone, but as we know, Americans don't like to be told what to do. A more intricate incentive structure will help with mass adoption, fueled by the simple superior economics that net-zero behavior can actually be cheaper, and investing in these solutions can actually be lucrative. More and more people are realizing this every day. Younger people play a crucial piece of this puzzle, too. I think there is the potential to see a decarbonization renaissance in the US and abroad over the next couple years.

 

Do you see any international trends that you think will soon become more relevant in the United States?

I think the net-zero commitments made by large corporations in Europe (e.g. Total, BP) will start to become a commonplace occurrence in the states. A great example is GM whose renewed commitment to electric vehicles is a remarkable departure from their lawsuit against California emissions standards less than a year ago. While the electrification of their fleet is a great goal, carbon credit and offsetting these operations demands innovative solutions. The obsession with carbon accounting using the Partnership for Carbon Accounting Financials (PCAF) or other methods will become omnipresent, creating new emissions marketplaces (right now we just have one in CA) and digital solutions to facilitate these needs will be a multi-billion dollar business. A good example is Silviaterra, providing offsetting services for Microsoft.

 

What comes next for Climate Fintech?

We hope that these types of digital financial technologies become more and more common, even normalized in everyday life. Just imagine if 80% of all credit cards included a carbon offsetting feature, or if 80% of all tech companies were net-zero by 2030. Mass adoption can have a real impact.

For us at New Energy Nexus, we’re actually launching a Global Climate Fintech Accelerator program this year, specifically designed to nurture these innovations and integrate them into the financial system. If you would like to get involved as a startup, corporate, or investor, please feel free to reach out!

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