The world of fintech is rapidly evolving with the sustainability agenda transforming the financial sector, creating social good and greener efforts across the globe. This is the result of new technology in the industry, which drives innovation and plays a key role in this new landscape.
To help financial institutions adapt to the changing landscape, sustainable finance startups are driving innovation and facilitating a new approach called sustainable finance, a new type of investment that focuses on creating a greener, more sustainable future for everyone to live in.
What is Sustainable Financing?
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Until recently, traditional investment institutions focused mainly on profit. Although sustainability has always been considered in the investment process, it was never mainstream and seen more as a bonus to these investment deals.
There has been a change in this space in recent years. Banks are slowly going beyond maximizing profit and are now actively considering environmental, social and governance (ESG) factors to promote sustainability―a process known as sustainable finance.
Today, several institutions have adopted sustainable finance, which follows an impact-first investing approach. Companies who follow this business model either prioritize or completely disregard profit in favor of social and environmental solutions. Essentially, these institutions use the power of investments to do good for society and the environment.
In short, sustainable finance is a new approach to investing, and many sustainable finance startups are driving innovation, facilitating numerous solutions to promote ESG factors within the financial sector.
Sustainable Finance Startups: The 17 Goals and Recent Trends
The UN released 17 Sustainable Development Goals (SDG) as a standard for institutions to follow to ensure that they are on the right track in making long-term investments in sustainable activities and projects.
The 17 Sustainable Development Goals (SDG) serve as a blueprint to achieve a better and more sustainable future for everyone. Source:United Nations
The UN estimates that the gap in financing to achieve the SDGs is at 2.5 trillion USD per year, indicating that sustainable financing is still a new concept that is far from being mainstream.
This isn’t to say that progress hasn’t been made. In fact, many institutions are actively utilizing sustainable financing by investing in companies that prioritize ESG factors over profit.
For example, in the energy industry, global investment in renewable energy reached 2.6 trillion USD in 2019, closing out a record-breaking decade in renewable energy investment.
While this is a good starting point in achieving sustainability, a report by Oil Change International indicated that global banks have funded $2.7 trillion USD into fossil fuels since 2015; this counterproductive financing does not help to achieve SDGs and indicates that the fight against climate change is going to take more effort and resources.
Despite this, the good news in all of this is that many institutions have already taken the first steps in promoting sustainability through sustainable financing. However, more effort needs to be made to see any positive changes in the environment, which is why sustainable finance startups are key players in streamlining the process of creating social good and achieving sustainability in not just the fintech industry, but all throughout the world.
Sustainable Finance Startups Driving Innovation
Arabesque is a global group of financial technology companies offering sustainable investment, advisory, and data services through advanced ESG and AI capabilities. Their vision is to create economic value combined with environmental stewardship, social inclusion and sound governance.
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Clarity AI is a sustainable finance startup that empowers investors to manage the impact of their portfolios through a proprietary technology platform that leverages big data and machine learning to assess sustainability for all societal stakeholders.
Envio develops cloud-based building technologies to affordably transform existing commercial buildings into smart ones without any disruption to infrastructure. Banks and financial institutions with several offices can implement it to optimize their buildings and be more sustainable.
Kora is a sustainable finance startup that makes sustainability profitable. Their platform engages with customers and employees to reduce their carbon footprint by rewarding them for sustainable actions.
mattrvest combines conversational technology and money management algorithms which can then design curated financial journeys for their users transparently. Their money management platform not only helps users save more money but is used alongside a matching algorithm that helps users save better by adopting and investing in sustainable finance products provided by their partners.
Sust is a sustainable finance startup that develops climate-related risk analytics across supply chains at a global scale to promote sustainable business and financial products. Their primary markets are financial services (asset management & insurance), climate-focused consultancies and large corporates (FMCG, consumer, tech).
Sustainable Finance Startups: A Conclusion
To see any real, positive changes to society and the environment, it’s going to take a lot of effort and resources. Undoubtedly, sustainable finance will play a huge role in this changing landscape. Fortunately, sustainable finance startups are already leading these innovative times, bridging the gap between sustainability and financial institutions—to create a more sustainable future for everyone to live in.
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