In order to attain the SDGs (Sustainable Development Goals) set by governments worldwide, green finance is shifting both public and private financial sectors towards sustainability. Traditional financial institutions are creating a new range of financial products and services with a focus on making a decent rate of returns while fostering environmental positive outcomes and managing ESG (Environmental Social and Corporate Governance) risks.
In the intersection between Sustainability and FinTech, we like to focus on Climate FinTech. In simple terms, Climate Fintech in the use of financial technologies to improve our climate. Within the Climate FinTech space we have identified 4 key areas of priorities: Carbon Offsetting, ESG Reporting, Climate Risk Analysis, and Banking and Payments.
The story of BNP Paribas & Plug and Play
By partnering with Doconomy, BNP Paribas Bank Polska aim to offer 3.3 million client’s digital tools for a sustainable lifestyle.
BNP launched the first checking account that donated 1% of its revenue to climate nonprofits. They teamed up with Doconomy to enable its customers to track and measure the carbon impact of their purchases. The bank launched 1% for the Planet debit card, which uses an API to track the carbon emission of each transaction. The API is connected with Doconomy that provides an independent climate calculation to help consumers understand their impact and reduce their footprint as it connects each transaction to its impact on the planet.
These are the main ways through which financial institutions can tackle sustainability.
The road towards Net-Zero
In addition to direct measures, companies and consumers can use indirect measures - carbon offsets - to pay for carbon reduction projects to lower the impact of their carbon footprint. Hence, Carbon Offsetting startups can help corporations offset or reduce their emissions.
There is an international effort to align climate monitoring and taxonomies between corporates and states who are collaborating to improve carbon accounting, disclosure and risk assessment (i.e. TCFD). For example, the European Commission is pushing an agenda that will guide banks and other institutions toward more transparency when disclosing their sustainability policies. ESG Reporting which encompasses carbon footprint calculation and reporting startups that can help comply with new disclosure requirements and understanding of a company’s impact on climate.
Growing Climate Risks
With advancement in IoT and AI, risks associated with climate change - rising sea levels, floods, wildfires, deforestation - can easily be factored into calculations and scenarios that influence capital-deployment decisions. Startups help understand the physical risk associated with climate change.
Banking and insurance customers are more aware and demanding than ever in terms of sustainability. Financial institutions will need to make serious efforts in this area moving forward. This is especially true for Gen Z and Y consumers, who are leading the shift toward more environmentally and socially friendly spending habits. Banking and payments solutions are helping businesses and consumers understand and act on their impact on climate.
Sustainable investing embraces all those investments contributing to environmental and social issues. They tackle challenges like renewable energy, waste management, greenhouse gas emissions, circular economy or social cohesion and integration.
“ESG is our top priority and every time we search for innovations, we search for sustainable innovations that can contribute to the SDG on top of improving the customer experience or efficiency of BNP Paribas operations”
Arnaud Auger, BNP Paribas
Check out our videos on Sustainable Fintech!
How Companies Can Adopt ESG Practices
Sustainability: The New Battleground for Finance - Fintech Europe Expo 2021 - Day 2
What Startups, Corporates, and Venture Capitalists Think About ESG Investing
The Future of Finance is Green, by Impax Asset Management & City of London
From Optional to Essential: The Role of Finance in Fighting Climate Change
“Reorienting private capital to more sustainable investments requires a comprehensive rethinking of how our financial system works.”
Julia Taeschner, Group Sustainability Officer, Director Investor Relations at Aareal Bank AG
Top 5 Startups expanding Sustainable Fintech
Sylvera is the world’s first carbon offset ratings provider that leverages geospatial data, ML and proprietary climate data to create a reliable and transparent assessment of carbon offset projects. As the company does not sell offsets, there is zero conflict of interest when rating offset projects.
Businesses use Minimum to comprehensively measure their Scope 1, 2 and 3 carbon emissions, plan and execute their Net Zero strategy, and achieve best-in-class Sustainability reporting and certification standards. Minimum offers their platform and engine through either a SaaS model or APIs for businesses to become carbon neutral.
Clarity AI provides a SaaS tool to help investors managing their portfolios for impact, leveraging big data and Machine learning. Clarity AI enables investment managers to offer their own clients a range of insights from their investments’ ESG risk and impact scores to their UN SDG contributions. This also helps facilitate the production of analytics and regulatory reports.
Jupiter Intelligence predicts risks of natural perils from severe weather and climate change. They have been rolling out a series of products all of which provide high-resolution, asset-level probabilistic climate risk analysis.
Commercial impact data for individuals and businesses. It offers a solution that enables users to track and manage multiple impact data including lifestyle impact, corporate impact, product impact, and more. It facilitates assessments and improvements on carbon footprint usage for efficient CO2 emission
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BNP Paribas - Plug and Play