Climate fintech: The state of the industry

As a corporate, you might be interested in climate fintech because:

• You feel the need to research and respond to relevant technologies, but you’re not sure where to start. 
• You worry about falling behind your competitors who are involved in climate fintech or collaborating with innovative climate fintech startups.
• Your clients are increasingly interested in ESG, and you want to know how climate fintech can help you accommodate their needs.

In 2022 and 2023, many sectors suffered from a general slowdown of funding activity. However, climate fintech has not seen as much of an impact. Climate fintech – or green fintech – has been gaining momentum over the past few years, and it’s not showing any signs of slowing down. 

Why is this happening? There is increasing pressure on both companies and governments to commit more to sustainability in response to growing demands for environmental action. The different use cases and applications, on top of growing relevance in financial markets, means the role of climate fintech is more important than ever. 

This is reflected in our latest annual climate fintech report, based on our database of 600+ startups we’re working with in the sector as well as additional research. The report shows that climate fintech funding increased across all regions in 2022 and 2023. I can also see other optimistic trends, including growing numbers of startups and a shift towards securing larger investments in later-stage deals. 

In this article, I’ll sum up a few of the key points from the report and how Tenity fits into the picture. I’ll talk about the following:

1. What is climate fintech?
2. What are the main trends in climate fintech?
3. What are the top use cases for climate fintech?
4. Top climate fintech companies
5. Climate fintech per country
6. How we support the climate fintech ecosystem at Tenity

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What is climate fintech?

Climate fintech are companies that operate at the intersection of climate, finance and technology. It’s sometimes also called green fintech.

Climate fintech covers a wide range of purposes, from encouraging better consumer habits, to using blockchain to monitor the quality of carbon credits. 

Sifted categorises climate fintech into a few sections:

1. Carbon accounting: these are companies that help firms measure their carbon emissions, or assess how sustainable their supply chain. It’s the most well funded sector within climate fintech.
2. Climate risk management: helping companies insure themselves against weather risk and provides data like climate intelligence.
3. Carbon offsetting: enabling companies to buy carbon credits to lower emissions, working with everything from brokers to marketplaces.
4. ESG reporting: helping companies and investment firms better measure their ESG and auditing their ESG rating.
5. Climate crypto: tokenising credits on blockchain or helping prevent the issues that come with carbon offsetting.
6. ‍Impact investing: making it easier for individuals to buy impact oriented stocks and invest in sustainable projects.

What are the main trends in climate fintech?

Our 2023 climate fintech report is based on data from 607 startups around the globe from the Tenity database (with results related to funding amounts coming from the 376 startups with available funding data). We’ve also taken an in-depth look at four important markets: Switzerland, Sweden, Singapore, and the UK.

Here are a few key statistics that stand out from the report: 

• The United States has kept its title as the country with the most climate fintechs, boasting 119 startups.
• With 364 startups based in the region, EMEA has more climate fintechs than NORAM, APAC, or LATAM.
• EMEA’s startups are also attracting more funding than other regions’, raising $958 million in 2022 (compared to $640 million for NORAM).
• Digital Payment and Account Solutions and ESG Data and Analytics Solutions are the most heavily funded climate fintech categories: In 2022, they raised $560 million and $555 million, respectively, in total funding.
• In the 2023 report, as in 2022, early-stage funding makes up the largest share of funding for climate fintech startups, at 38%, but this is down from 47% in last year’s report.
• 37% of climate fintech startups have a female CEO or at least one female co-founder – up from 20.8% last year.

Here are some more key takeaways from our 2023 report.

EMEA has overtaken NORAM in number of climate fintech companies in the region

In 2023, as in 2022, the US came out on top as the country with the largest volume of climate fintechs. Of the startups from our report, 119 are US-based. 

However, from a regional volume perspective, EMEA is now topping the list, with 364 European climate fintechs – more than any other region. In 2022, EMEA also overtook NORAM in terms of funding for climate fintech startups, with the EMEA startups in our program getting $958 million worth of investments in total (vs. $640 million in NORAM).

I can see why this shift happened. Even with the entrepreneurial advantages the US has, climate fintechs there receive much less support from policymaking than in countries like Germany. In Europe, meanwhile, climate-related regulations (e.g., the European Green Deal and the SFDR) are forcing companies to reveal their environmental impacts and focus on low-carbon emissions. 

This means companies need new tools like carbon footprint calculators and lifecycle assessment software to assess their carbon emissions and measure the environmental impacts of their products or services. 

As for APAC and LATAM, these regions have seen substantially less funding activity and produced fewer startups compared with NORAM and EMEA. However, funding activity is still accelerating in these regions. Compared with the previous year, 2022 saw growth of 49% and 876% in the total funding for climate fintechs in APAC and LATAM, respectively.

Key markets have seen good growth in climate fintech with the UK leading the charge

Our report includes an analysis of four key markets: Switzerland, Sweden, the UK, and Singapore. All of these countries’ climate fintech startups have seen good growth, with sizable increases in the average total funding per startup.

Of the four countries, Switzerland and Singapore possibly hold the highest per capita number of climate fintechs: Switzerland has 4.7 climate fintechs per million inhabitants. Singapore is only slightly behind with 4.6 climate fintechs per million inhabitants – double the number it had last year.

However, the UK has the largest number of startups overall, with 82 of the climate fintechs from our report based there. It’s also way ahead in terms of other metrics, such as funding volume – with $753+ million raised to date – and the average total funding per startup, which now stands at $9.2 million.

Finally, Sweden is also doing well, gaining the runner-up spot for total funding raised to date ($129+ million) and average total funding per startup ($4.6 million).

Digital Payment & Account Solutions and ESG Data and Analytics Solutions attracted a lot of funding

In our report, we used the Green Fintech Classification dataset created by the Green Digital Finance Alliance to organise climate fintech companies in eight different categories.   

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Of these, Digital Payment & Account Solutions took the largest slice of the funding pie in 2022.

However, ESG Data and Analytics Solutions wasn’t far behind, with $555 million in funding. The ESG category is also the largest in terms of how many startups it includes (225, up from 88 last year). 

Its prominence isn’t surprising given how difficult ESG regulations and guidelines can be to navigate and how often they change. As I’ve mentioned, the EU is especially known for its sticky red tape, so it’s also not surprising that this is where most of the ESG Data and Analytics Solutions startups are based (almost 70% of startups in this category).   

Later stage funding rounds are picking up steam

Climate fintech is still a new space, with the average founding year of 2017 –  so it makes sense that a lot of climate fintech companies are still early stage.

Although early-stage funding is still the most common type of funding in our report, there’s a growing trend of companies securing larger investments in later-stage deals. In this year’s report, early-stage funding accounts for 38% of all funding, but this is down from the previous year when it accounted for almost half (47%) of all funding. 

This trend suggests that more climate fintech startups are growing beyond their initial stages and raising larger sums of money to fuel their growth.

Climate fintech is increasingly female

In general, the climate fintech space is quite gender diverse. In the 2022 report, we found that climate fintechs had almost twice as many female founders as fintech in general. 

The 2023 report shows that there are now even more startups with women entrepreneurs at the helm. Of the 607 startups we counted, 37% had at least one female co-founder or a female CEO (up from 20.8% in last year’s report). 

For startups founded between 2019 and 2022, this rate is even higher, at 39%, compared with 35% for startups founded in the three years previous (2016–2018). If this pattern is anything to go by, I expect we’ll see the proportion of female-led climate fintechs continue to steadily grow. 

What are the top use cases for climate fintech?

Like regular fintech, climate fintech covers many kinds of digital financial technologies and services. However, its focus is narrower, namely, focusing on bringing down carbon emissions or “decarbonization.” Essentially, it’s about using digital technology to help everyone make environmentally friendly financial choices.

In recent years, we’ve seen hundreds of climate fintech companies emerging worldwide, and helping change how the financial system deals with climate change. As our 2022 and 2023 reports show, many of these companies are doing well, attracting investment, growing their customer base, and expanding their products.

Where you can see climate fintech in action

Currently, the top use cases for climate fintech include:

• Monitoring carbon emissions and climate risk via financial transactions.
• Using artificial intelligence to rate large companies’ environmental and social performance (ESG).
• Revenue based financing for climate tech startups (offered by companies like Enduring Planet).
• Tools that measure the environmental impact of consumers’ financial choices (such as credit cards that track the carbon footprint of the user’s purchases).

Climate fintech is also being used with blockchain architecture to solve problems with voluntary carbon markets (VCMs). VCMs are platforms or systems where individuals and organizations can voluntarily buy and sell carbon credits to offset their carbon emissions. Unfortunately, it can be complex and costly to monitor the actual emissions reductions that such projects achieve, as well as to make sure that reductions get reported accurately. 

However, blockchain technology is one way to ensure efficient, accurate monitoring and ESG reporting. It can be used to verify and trace emissions reductions and to confirm that emissions reduction initiatives really work. Web3 and climate carbon-based decentralized finance (DeFi) are particularly good assets for improving transparency and checking that carbon offset projects are legitimate. 

Top climate fintech companies

What are some examples of great climate fintech companies? Mympact, Doconomy, and Inyova are three climate fintechs from the Tenity ecosystem that are doing well. 

Mympact

Mympact is an app that allows everyone to track their carbon footprint and find more sustainable alternatives to the products they purchase. Users can connect their bank accounts to the app, which uses data about their transactions and special tools to calculate the CO2 impact of their purchases. The app then offers carbon offset options, personalized tips for sustainable living and impact investing, and a marketplace where users can buy thousands of eco-friendly products.

Doconomy

Doconomy is a tech company used by leading banks, financial institutions and payment companies like Mastercard, Klarna, BNP Paribas, and Standard Chartered. It offers various tools to help companies and individuals measure their environmental impacts so that they can make better choices for the planet and lower their carbon footprint. 

For example, Doconomy’s cloud-based software service helps measure the environmental impact of financial transactions in terms of factors like carbon emissions, water use, and the social cost of these. They also have a tool called the 2030 Calculator that helps brands understand how much carbon their products generate.

Inyova

Inyova is an investment platform that allows people to invest money sustainably. 

Invoya customers can choose what’s important to them (e.g. clean energy, circular economy, or gender equality), and the Invoya algorithm uses this information to generate personalized, risk-optimized portfolios. These portfolios include 30 to 40 individual stocks picked from around 300 companies, as well as Green Bonds for some investors. 

Inyova also provides apps for customers to track their sustainable investments and see the positive impacts of the companies they’re supporting. 

Climate fintech per country

Switzerland

• 41 startups
• Collectively raised USD 32m in 2022 
• The industry is very early stage, but on the right track
• 4.7 climate fintechs per million inhabitants

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Singapore

• 25 startups
• Collectively raised USD 37m in 2022
• Average size of raise is USD 6.15m

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Sweden

• 28 startups
• Collectively raised USD 46m raised in 2022
• Average size of raise is USD 7.7m

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UK

• 82 startups
• Collectively raised USD 286m in 2022
• Average size of raise was USD 13.6m

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How we support the climate fintech ecosystem at Tenity 

At Tenity, we operate as an open innovation ecosystem, where we connect corporates and startups to help with innovation. We run our own startup incubators twice per year, create accelerators for corporations, and manage our own fintech fund.

When it comes to climate fintech, there are a few ways we’re supporting both startups and corporates. 

We operate as an ecosystem, which allows us to easily stay on top of trends in climate fintech

At Tenity, we run incubator programs to support startups in fintech, including climate fintech, and we help corporates to set up their own startup accelerator programs. Because we’re constantly working with startups and corporates on the latest climate technology, it’s easy for us to stay on top of trends in this space. 

This in turn means we can match corporates with startups that can help with their climate fintech strategy, and we know how to create bespoke corporate accelerator programs specifically focusing on climate fintech. 

The wide reach of our ecosystem means that Tenity also has a presence in many countries (including all of those from our climate fintech report) and hubs in Europe and Asia. 

Because of this, we have a great feel for the climate fintech sector, and we can interact with startups to get to know them better. Already, we ran the first ever program dedicated to climate fintechs two years ago in our core incubator in Zurich, and we later ran the first dedicated climate fintech incubation program in the Nordics and Baltics.

Epic Impact, mympact, Sustainaccount, and Norsia, climate fintechs from our Zurich program, have already received international recognition. In 2021, Sustainaccount and mympact were also nominated as finalists for the Monetary Authority of Singapore (MAS) Global Hackcelerater at the Singapore Fintech Festival.

Our first hand experience in corporate innovation helps us match corporates with the right startups

Tenity was born from corporate innovation. I initially led corporate innovation for SIX, the Swiss Stock Exchange. I eventually set up Tenity as a spin-off from SIX, and we’re now independent. 

Because we come from corporate innovation ourselves, we know firsthand what successful innovation looks like, what challenges are involved, and how to overcome these challenges.

In addition, we’re specialized in fintech, so we have in-depth expertise in this area – including climate fintech. Our network and database are a rich resource for scouting climate fintech startups, so corporates that partner with us are likely to find startups with a use case that makes sense.

This allows us to help push the barriers of climate fintech. By connecting the two, corporates don’t have to develop climate technology in-house and startups can work with large clients that help develop their technology. 

We cover the whole innovation lifecycle, so we can give companies the best climate fintech–related tools and knowledge for the level they’re at

Some companies are only just learning about climate fintech, whereas others are ready to invest in the sector. We can help corporates at every stage of this innovation cycle. 

We see corporate innovation through three lenses: 

1. Learn

When we partner with a corporate, we help them to work out what they want to achieve by incorporating climate fintech. We then help then understand and learn about the world of startups with:

1. Community events
2. Conferences
3. Executive events
4. Access to our startup database

2. Collaborate

We have a large startup database of 2,000+ fintech startups, including more than 600 climate fintechs. This means we can provide plenty of opportunities for corporates to find partners with climate fintech expertise.

Our services include:

• Holding deal flow sessions
• Creating bespoke corporate incubators or accelerators
• Providing collaboration support for Proof of Concepts (PoCs)
• Scouting for startups with the climate fintech expertise that corporates need

3. Invest

We help corporates become part of the startup world via investment or acquisition. In 2022, companies invested more than $1.83b worth of funding into our climate fintech startups (based on companies with disclosed funding data in our database).

To help corporates get financial as well as strategic returns on their investment, we give them the opportunity to:

1. Join our fintech investor community and become part of the ecosystem.
2. Become a limited partner in our fund by investing in our early stage fintech fund.

Work with us to get involved with climate fintech

Judging from the burgeoning numbers of climate fintechs, the increasing amounts of funding they’re attracting, and other promising trends shown in our report, it looks like the climate financial sector is only going to keep growing. With our deep understanding of this space, Tenity is well positioned to support this growth and help corporates get in on the act.

If you work at a corporate and are looking to partner with climate fintech startups, reach out to us to see how we could help you.