All investment strategies and investments involve the risk of loss—all except perhaps one: Investing in future-proofing our planet. A recently published report from Intergovernmental Panel on Climate Change (IPCC) paints a grim picture of how we are doing as a species. The report provides one of the most comprehensive analyses of the intensifying impacts of climate change and future risks for the world. The IPCC estimates that in the next decade alone, climate change will drive 32-132 million more people into extreme poverty. Global warming will jeopardize food security, increase mortality rates, and will result in irreversible effects causing stronger storms, longer heatwaves, droughts, extreme precipitation, rapid sea-level rise, loss of Arctic sea ice and ice sheets, thawing permafrost, and more.
At WhiteSight, we keenly follow the reinvigorated responses from the FinTech ecosystem towards the climate change imperatives. This has branched out in the emergence of the Green Finance phenomenon, where the FinTech ecosystem stakeholders are aligning their green thumbs to keep up with the effects of climate change. This Earth Day, we reflect upon some of the moves by these participants in various activities across the span of January-April as they guide the Future of Finance towards net-zero.
Banking On A Cleaner Future: Bank Initiatives
Given the perennial foundation and availability of resources, it doesn’t come across as news that banks are taking the steps toward sensitizing themselves and others on the challenges and opportunities of green financing. Not only have they been remodeling their portfolios to embed the environmental, social, and corporate governance (ESG) criteria, but they are also expanding help to fellow business providers and consumers through individual green projects. Natwest’s launch of an online Climate Hub and green loans to help small and medium enterprises achieve their sustainability goals and Santander’s Green Investment platform to invest in renewable energy projects as evidence of their commitment to transition to a low-carbon economy serve as few of the many examples of bank initiatives in the green space.
Many have taken a concrete approach to mobilize the green agenda by appointing respective sustainability executives. While HSBC appointed Head of Banking Alan Duffy as its first Head of Sustainable Finance to help tackle the critical mission of transformation, Standard Chartered welcomed Marisa Drew as their chief sustainability officer to lead the bank’s decarbonization drive.
To Save One World, Others Collide: Green Partnerships
The collaborative efforts of various industry members stole the majority of headlines for the first quarter of the year. By joining hands (or rather should we say green thumbs), financial institutions are bringing innovative solutions to the green landscape. Accurate climate and environmental data is at the very core of calculating and reducing carbon footprint, and Ambee’s partnership with NayaOne aims to help FinTechs do just that – access accurate and reliable data to help fight climate change. Tink and Cogo follow a similar tangent, forming a strategic partnership to provide personalized carbon footprint tracking services to support NatWest’s carbon tracking app. HELPFUL and Mastercard’s launch of the first-ever digital wallets and micropayments designed to make it easier to collect rewards for returning single-use plastic bottles is another scheme set to reduce Scotland’s CO2 emissions and inspire action.
That’s not all – a supergroup of big-name companies consisting of McKinsey, Stripe, Alphabet, and Shopify took a major plunge into carbon removal by putting forward a $925M advance market commitment to accelerate the development of carbon sequestration technologies.
Productizing Sustainable Initiatives: Inventive Products
Another segment that grabbed attention with its eventful buzz during the four-month period was that of the assorted novel products introduced to the green finance market. Governments and investors worldwide are joining the race to create possibilities from clean energy resources while also discovering new capacities in existing energy sources. Driving the same notion forward, Enfuce expanded its Card as a Service with the introduction of MyCard, a turnkey card issuance offering with a wide selection of sustainable card materials for European FinTechs to choose from. The movement doesn’t halt here, with green financing solutions finding root in emerging markets and underserved communities. The Lemonade Foundation formed a coalition, building blockchain-based climate insurance for subsistence farmers and livestock keepers in developing markets. AirCarbon Exchange’s approval from Abu Dhabi Global Market to create the world’s first fully regulated carbon trading exchange and carbon clearinghouse is also one of the many significant highlights in the sector.
Investing In The Future: Mobilizing the Green Dollar
Asset class is of considerable importance to ESG investors and leaders across the globe, which is why it is critical to weigh the allocation of capital in the growing decarbonization efforts by varying experimentations. The expansion of the green finance space has been empowered by many funding rounds over the recent years, with a total of $360.8M raised by the companies in 2022, giving the segment the much-needed boost to drive the global shift. Deepki’s $166M Series C funding to help real estate investors reduce carbon emissions, Moss.earth’s $10M Series A round to develop a web3 product to make environmental accounting and asset generation more convenient, and Colossus’ $36M Series A raise to accelerate the clean-energy movement via their solar software and marketplace model account for few of the numerous fundings that the vertical has observed to benefit the environment.
The More The Merrier: Other Contributions
Regulatory actions, mergers, and acquisitions have equally played their part in the quest for modern-day’s climate recovery. ANZ’s $50M investment for a minority stake in climate finance firm Pollination to focus on the transition needs of institutional clients in terms of sustainable finance and carbon markets proves to be a prime example of the same. Authoritative bodies have equally stepped up to address the urgency of the situation – with The MENA Fintech Association (MFTA) launching the Sustainable FinTech Alliance to help its members create positive environmental impacts; and The Securities and Exchange Commission proposing rule changes that would require registrants to include certain climate-related disclosures in their registration statements, including disclosure of a registrant’s greenhouse gas emissions. Regulatory affairs are gaining momentum, with many policy frameworks integrating ESG approaches and thereby enabling the further development of the sustainable finance market.
Earth Day Isn’t Just A One-Day Show; It’s An Everyday Effort
Even though we all take a moment to acknowledge Earth Day on the 22nd of April every year, the reversal required by our planet needs us to embrace Earth Day as an everyday event to avoid creating more new wrinkles in its recovery. Global financial efforts, being the elemental fragment of the way the world struggles with climate change, will need to be taken more seriously, and engagement that is matched with equal-part action will have to be at the forefront of every decision that is taken toward prevention, reduction, and building of a more sustainable world.