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It’s easy to assume that financial services and fintech organizations have less responsibility to protect the environment than other industries. After all, unlike manufacturing and logistics, for example, they don’t have a significant direct impact on things like carbon emissions. But that doesn’t mean they don’t still have an important part to play. Given their fundamental role as financial intermediaries in the global economy, they certainly do.
This responsibility also extends to fintechs, given that digital platforms are pivotal in facilitating investments in green initiatives – for which total global funding neared $500 billion in 2022. While the last couple of years have seen investor interest in green initiatives drop somewhat, the fintech industry remains well-positioned to promote environmentally conscious spending habits and encourage more sustainable consumer choices.
Promoting sustainable lending practices
‘Green lending’ is a new category of financing that’s specifically designed to fund projects that make a positive impact on the environment. For example, a company might exclusively loan money for projects like renewable energy initiatives for business customers or energy-efficient home upgrades for consumers.
The success of such companies can be heavily attributed to the rise of green bonds, which reached a value global of $600 billion worldwide in 2023, while cumulative green bonds insurance reached $2.8 trillion.
Digital payments and signatures are now standard
In recent years, the high street bank has become a rarity, with even more expected to close their doors for good in the coming years. Consumers have instead grown accustomed to digital payment methods using online wallets like Google or Apple Pay, with most transactions now happening online.
However, it’s not just digital payments that are dramatically reducing the environmental impact of financial services – many enterprises are also integrating fintech solutions that facilitate greener back-end operations, such as digital signatures.
How can you measure the environmental impact of finance?
Many financial services organizations have faced criticism in recent years for so-called ‘green washing’, or making misleading or exaggerated ESG claims. This isn’t helped by how difficult it is to measure the environmental impact of everyday banking operations.
Although the impact of a single transaction is admittedly negligible, things start looking very different when you consider that there were 724 billion financial transactions in 2023 alone. However, innovative fintech startups, such as ecolytiq, use advanced data analytics to classify the environmental impact of certain spending categories.
It's clear that fintechs, as key enablers of the delivery of modern financial services, have a big responsibility to enhance their sustainability initiatives and have them seamlessly incorporated into their products and services. With both consumer and business demands for green finance only expected to grow – both in the short and the long term – it’s also an important business opportunity.
