by Anya Breen
We are in a catastrophic climate and nature crisis. There has never been a more important time to act. The IPCC’s ‘final warning’ 2023 report showed a 1.1°C rise in global temperatures from pre-industrial levels. WWF reported a 69% loss in reptiles, mammals, birds, fish and amphibian populations between 1970 and 2022. In order to reach both net-zero and nature restoration targets across the world there needs to be a tidal wave of capital and investment. Additionally, the mechanisms need to be in place for this to be adequately distributed to where it can be most effective.
In 2022, global green investments reached $495 billion, up 17% from 2021. This reflects growth in green investment opportunities that will only continue to rise over the next few years. Research from Boston Consulting Group has highlighted an $18 trillion investment gap to finance the green energy transition through 2030 and PwC predicts that ESG-focused institutional investment will reach $33.9 trillion in 2026.
Both the opportunity and the need that this has provided have meant a substantial uptick in startups bridging the FinTech and ClimateTech sectors. This has allowed both businesses and consumers given both businesses and consumers the opportunity to play a part in transitioning our communities, societies and economies to sustainable alternatives.
The unsung heroes of the space are of course the disruptors to traditional banking, open banking platforms and digital banking challengers. Bolstered and in some cases enabled by dramatic legislative changes such as PSD2, they have democratised the financial services space and handed control over financial data back to the consumer. Not only has this reduced the waste produced by traditional payment methods, but it has cleared the space for the new kids on the block such as B2C sustainable investment apps and green financial products.
These new fintech players have capitalised on these changes, and in doing so have had a significant impact on the availability of capital for innovative projects. Following the example of a published article in the journal ‘Sustainability’, key examples can be broadly categorised into the following:
1. Crowdfunding platforms:
Given the often high initial investment needed for green infrastructure projects, despite long-term financial and environmental returns, crowdfunding platforms offer an alternative that can be really attractive to project owners and developers. These platforms not only raise the profile of the project, but provide the essential capital to get these projects moving.
Trine provides consumers with the opportunity to crowdfund solar projects in emerging markets, having so far ploughed over €87m into projects around the world through almost 14,000 investors. Founded in Gothenburg, Sweden, the platform has a low barrier to entry (€25), and is an example of how fintechs can directly impact Environmental Justice, aiding the sustainable transition in emerging markets through funneling capital from higher-income countries.
2. Impact trackers
It is extremely difficult to reduce impact when you don’t know what that impact is. Partners that can provide this information, and work to help institutions prioritise impact reduction in on areas where it will be most effective, are increasingly important in the sustainable transition of complex financial products.
Partnering with major financial institutions, Doconomy uses data and behavioural science to demonstrate and proactively reduce the environmental impact of transactions. Founded in Stockholm in 2018, the company made headlines with its recent acquisition of Dreams to broaden its behavioural science offering. Having recently announced a strategic partnership with BCG the company is continuing to widen financial institutions’ access to sustainable solutions and providing large-scale change by shifting the focus of the giants in the industry.
3. Direct investment platforms:
Looking to address the funding gap and availability of capital to projects that benefit climate and nature, direct investment platforms offer individuals and businesses the opportunity to put their money into collated suites of environmental products.
Eg. Klima (aka Climate Labs GmbH)
In contrast to other direct investment platforms in this space, Klima assumes that your primary interest as an individual is the impact you’re making and not financial returns. The Klima app calculates your environmental impact as an individual, before encouraging you to reduce what you can and offset the rest.
The ‘offsetting’ part of the platform involves investment in rigorously assessed climate-positive climate positive projects through a personalised subscription model. Users can choose to ‘invest’ in natural solutions (eg. tree planting), social solutions (eg. providing clean cook-stoves) or tech-based solutions (eg. solar). The app is live in 18 countries, and although the founders are keen to emphasise that offsetting isn’t a final solution to the climate crisis, like Trine it also actively works to plug money from the pockets of those living in higher-income countries into funding the sustainable transition in emerging markets.
4. Peer-to-Peer (P2P) trading platforms:
The rise of peer-to-peer trading is particularly important where environmental goods are generated by individuals or communities, and not institutions. This enables local markets that financially reward individuals for positive action, and encourage change at a community level.
Founded in 2016, Powerledger’s blockchain-enabled platform matches energy supply to energy demand across communities, enabling the P2P trading of renewable energy. In addition to this, it has developed a proprietary blockchain technology which consumes less energy than other solutions in the space. Now present in 10 countries, the company’s chairman and founder Dr Jemma Green has also made a significant impact across the sector in her educational and campaigning work. They aim to democratise and facilitate the transition to renewables globally through changes on a local scale.
However, the boom has not been positive for every new venture. A crowded space, coupled with by inroads made by existing incumbents and larger challengers, has meant a large number of beloved startups and products have gone under. An example of this was Clim8 Invest (see my interview with Duncan, Founder and CEO of Clim8 back in 2021 here).
What we are seeing in FinTech is the wide-scale enablement of alternative avenues for change, which actively complement vital agendas at a governmental level. Fintech is a catalyst in the tech sector for the growth and funding of projects both within tech and outside of tech that have a genuine impact on the crisis we’re facing today.
As consumers, investors, and practitioners we should all be looking for ways in which we can support the continued growth of this sector as part of the broader movement towards a tech sector that prioritises people and the planet.
At Atara Partners we are in the business of helping start-ups grow through our unique approach to executive search. If you’d like to learn more about Atara Partners and our work in executive search contact us here. Or check out our blog on some other Energy Disruptors.