Achieving Net-Zero: The Fintech Industry’s Sustainability Journey

Net-zero emissions have emerged as a paramount global imperative, with corporations worldwide racing to reduce their carbon footprint. While the push for sustainability gained significant momentum following COP19, it poses a unique challenge for burgeoning industries like fintech. Fintech Magazine delves into the hurdles the fintech sector faces, its progress, and the pivotal role of carbon tracking fintechs in supporting the finance industry’s quest for net-zero emissions.

Laimonas Noreika, CEO, and Co-Founder of HeavyFinance, underscores the urgency, stating that «achieving net zero carbon emissions is now at the top of the agenda for many fintechs.» Societal and regulatory pressures are driving fintech companies to align their operations with sustainability goals. Noreika emphasizes that «as sustainability becomes a competitive advantage and regulatory necessity, fintechs are actively positioning themselves at the forefront of the net-zero movements.»

Kris Sharma, Financial Services Sector Lead at Canonical, echoes this sentiment by pointing to the UN-convened Net-Zero Banking Alliance, a global consortium of banks representing over 40% of global banking assets committed to achieving net zero emissions by 2050. According to Sharma, this reflects the financial industry’s recognition of sustainability’s importance, adding that «in a world shifting rapidly toward a net-zero economy, fintech sits at the apex of two net-zero enablers – financial services and technology.»

However, not all voices in the fintech community share the same optimism. Steve Round, Co-Founder of SaaScada, believes that sustainability «isn’t happening» to the extent required. Round emphasizes the need for fintechs to prioritize sustainability and environmental impact measurement, asserting that they have the potential to drive substantial change beyond their own operations.

While there are mixed views on the industry’s progress, some notable sustainability initiatives are already underway. For instance, the Bank of Palestine’s Green Loans program promotes water and energy efficiency in rural areas, and Bank Australia purchased a conservation reserve to protect natural land. These efforts, while commendable, are only the beginning.

Suresh Vaghjiani, CEO and Co-founder of Clowd9, emphasizes the importance of having a clear plan and route to net zero, especially for businesses struggling to alter their models. However, he calls for more than just «add-ons» and stresses the need for systemic change.

To fully integrate net-zero initiatives into fintech operations, banks and fintechs must move beyond publishing corporate social responsibility reports. Round advocates for weaving sustainability into product offerings, offering financial incentives for low-carbon choices, and harnessing environmental data to inform decision-making.

Nonetheless, the energy-intensive nature of data-driven tools in fintech, such as AI, and cloud computing, poses a significant challenge. According to Canonical’s Sharma, addressing this energy consumption is crucial, but fintechs also have an opportunity to innovate and develop new business models that align with net-zero goals.

Sharma outlines three key areas where fintechs can contribute to achieving a net-zero world: reducing greenhouse gas emissions across supply chains, enabling businesses with tools for net-zero products and services, and assisting financial institutions in complying with climate risk regulations.

Investment in climate change-based fintechs is on the rise, with companies like HeavyFinance facilitating sustainable investments through Green Loans. These fintechs are seen as pivotal in helping financial institutions achieve their net-zero goals, providing transparency on emissions, assessing risks, and supporting investment decisions.

Consumer demand is expected to be a driving force in the proliferation of climate-based fintechs. Fintechs can empower consumers with tools to understand the climate impact of their spending and encourage behavior changes. This demand-driven growth presents an opportunity for fintechs to lead the way in sustainable services.

The journey towards net-zero emissions in fintech is gaining momentum, but challenges remain. Overcoming the lack of a universal methodology for measuring climate impacts and fostering collaboration among stakeholders will be crucial. While fintechs and financial institutions may achieve net-zero for reporting purposes, their broader impact on the world will determine their success in making a meaningful difference. The fintech sector holds the potential to lead the way toward a net-zero future, with innovation and collaboration as key drivers of this transformative journey.