Leading the charge for sustainability

How fintech are key players in creating a cleaner, greener future. By Jeremy Baber, CEO of Lanistar.

The climate crisis has officially reached “a code red for humanity.” This is according to the latest Intergovernmental Panel on Climate Change (IPCC) report, which delivered a “final warning” earlier this year. The urgency for investments and capital to be placed in sustainable hands for meaningful action has therefore only increased. To safeguard a transition towards greener practice and avert the environmental crisis as much as possible before it becomes too late, intelligent allocation of economy is imperative. The finance sector remains the principal driver for any such decisions, and so ultimately crafting a lower-carbon and more sustainable world is primarily in their hands.

Historically, the sector has always led the way for incorporating more sustainable practices, particularly when it comes to investing in energy-efficient and work-efficient technologies that we will continue using for years to come. The rise of fintech’s, alongside investments in the use of artificial intelligence (AI), the internet of things (IoT), machine learning (ML) and even the proliferation of blockchain are all ways in which finance have been ahead of the mainstream in adopting newer, cleaner technology.

Now, with environmental consciousness at an all-time high, both from a governmental and consumer standpoint, the responsibility is upon fintech’s to mediate this transition to greater sustainability. The time for sustainable net zero or even net negative global CO2 emissions is now to ensure a sustainable future before it is too late.  

Ana Carolina Franco-Soto

Managing Partner of Russell Bedford’s Dominican Republic firm, reflects on these times and remembers her grandfather.

I recall waiting on my grandfather with his thick black briefcase, carrying the inventory registers that he had just audited and sitting in his home office for hours, as there was still very limited computer-based accounting in our economy. Now, long gone are the days of tons of papers, pencils and thick black briefcases, that preceded this greener, more environmentally responsible and efficient present, in which we develop our everyday more agile practices to support strategic and timely decision making for business.

A cleaner consumer conscious through cleaner practices

Recent research from the open banking platform Tink has revealed that 40% of customers wish to track this impact through services provided by their bank. Consumers want a clear conscious when it comes to their personal impact, and therefore to hold their retail businesses of choice accountable, especially when many will stake green claims for consumer trust but not actually follow through.

Fintech’s can hold feet to the fire in this regard, and act in the best interests of their own consumers as an intermediary for directing businesses to change. Currently, there is a significant gap in the market for innovative tracking solutions, with Tink’s research suggesting a significant number of customers would switch purely for access to tools to track carbon footprint. Whilst 30% of surveyed banks have expressed interest in offering these tools, currently these institutions have zero plans to actually do so. It is easy to make green claims to gain customer support, but fintech’s pushing for responsibility for the sake of their customers helps motivate action.

Gen Z and millennials have proven to be more environmentally conscious generations than ever before when it comes to their spending habits, in particular with their demands for greater transparency when it comes to tracking and reducing their overall impact on the environment. Retail Week reported over half of UK consumers are more likely to buy from a retailer or brand with a strong ethical and sustainable ethos, with Millennials more likely to be eco-conscious and by contrast the Boomer generation less so than other generations. The future market is a sustainable one, and fintech’s should be looking to capitalise upon it.

A new era for investing in sustainability

The rise of financial technology over the past decade has created a new era of potential for sustainable investing, particularly in the fields of ESG investing, green financing and carbon neutrality. Fintech’s have always enabled innovation and contributed positively towards sustainability for a lower-carbon world, particularly as they aim to disrupt traditional finance operations in a customer-focused way.

Digital payment solutions can lead the charge towards sustainability and a low-carbon economy. The carbon footprint brought by physical currency – i.e., its creation, transportation, disposal, etc. – is minimised or else eclipsed by using digital cash transactions. Utilising digital removes the need for both plastic cards and paper transactions, streamlining transaction processes in an environmentally conscious way through reducing company waste.

Change still requires a business incentive

Changes in operations absolutely require a business incentive for CEOs to choose to adopt.  

In highlighting a consumer demand, businesses can feel more secure in continuing to fight for innovations in technology and lower-carbon alternatives, as both enable them to have an edge from a consumer standpoint.

Nevertheless, customers are smarter and more discerning than ever when choosing financial services and are more likely to scrutinise green credentials before committing to a provider. It is no longer as simple as just claiming to support green initiatives; real meaningful action is needed at every step and with every initiative to attract and secure interest from target consumers, lest they leave to seek a stronger alternative elsewhere. The truth is that, whilst many bigger fintech’s have greater resources to allocate to sustainable initiatives, few are actually choosing to do so.

Smaller fintech’s lead; bigger giants to follow

Financial organisations with bigger pockets have the power to push for greener tech across the board, yet the agility of smaller fintech’s to deploy sustainable initiatives has meant that they are often leading the charge for greener decisions across operations. As the fintech sector continues to mature, business initiatives can continue to refocus the ecosystem away from short-term successes and instead towards long-term green practices. Yet, if traditional companies are unable to change, they have the potential to be outmanoeuvred by their smaller underdog competitors.

Similarly, it is time for the UK government to step up their responsibility to support and protect greener technologies. The finance sector has the power and potential to apply pressure for change in this regard, but policy is indeed needed without the promise of profit to secure a better future.