Global
Fintech and sustainability: Everything you need to know
Andrea Fritschi
It’s impossible to miss the world’s turn to sustainability. And financial technology as a sector is not immune.
In Tenity’s 2024 Climate Fintech Report, we found that the number of fintech startups across the world is ever-increasing. While different organisations use different definitions of sustainability, there’s growth wherever you look. For instance, according to Fintech Global, the market for environmental, sustainable, and governance (ESG) data is expected to top $2.1 billion in 2024, up from $1.9 billion in 2023.
I’m the CIO of Tenity, an innovation ecosystem and fintech accelerator headquartered in Switzerland. In this guide, I want to share some of the key trends that we’re seeing in sustainability in fintech. I cover:
- How is fintech uniquely positioned to drive sustainability?
- What are the different types of green fintech?
- What’s the future of fintech and sustainability?
- How Deedster and Urgentem are enabling consumers and corporates meet their sustainability goals
Want to know more about trends in fintech? Reach out to us at Tenity.
How is fintech uniquely positioned to drive sustainability?
When it comes to sustainability, the finance industry is under three simultaneous pressures:
- Regulatory pressure to declare ESG performance—particularly for those companies that are publicly listed. As a result, they need to measure, analyse, and disclose their carbon impacts, contribution to pollution, and other environmental factors.
- There’s pressure from consumers. According to Mambu in 2022, 60% of consumers say they would like every financial service they use to be sustainable. In fact, PwC found that, as of 2024, consumers are willing to pay a “sustainability premium” of as much as 9.7%.
- Companies are experiencing changes in the priorities of their investors too. In 2024, Morgan Stanley found that 77% of investors said they were “interested” in sustainable investing, with 40% “very interested”. They also found that, in the next year, the majority expect to increase the proportion of their portfolios that is allocated to sustainability.
Fintechs are helping financial institutions respond to these three pressures by providing the technology that they need to do so. Ultimately, that’s what fintech is all about—providing tech innovation within financial services. And it’s that which makes fintech uniquely positioned to drive sustainability.
So, in response to these pressures, fintechs and other new technology startups are enabling financial incumbents, consumers, and investors to meet their sustainability goals:
- Companies can report more accurately on their climate risks and impacts—and therefore benefit from related incentives.
- Consumers can access greener investments and financial products in greater numbers.
- Investors can get transparency on their investments, based on more robust KPIs.
In the next section, I’ll discuss in detail some of the ways they do just that.
What are the different types of green fintech?
When it comes to sustainable finance, fintechs are innovating at an impressive rate—in every part of the financial industry, from reporting to lending.
Here are some of the problems and technologies that fintechs are currently working on.
ESG reporting technologies. Following various government initiatives in recent years—such as the European Union’s corporate sustainability reporting directive of 2023—publicly listed companies need to produce a sustainability report to disclose information about their ESG performance. They need to track metrics relating to pollution, water stress, carbon emissions, and much more.
However, historically, the data on these topics hasn’t been very robust, nor have there been robust ways to collect it. But if corporates don’t measure this data correctly, they won’t meet their obligations and targets.
That’s where fintech comes in, to make this reporting easier, by providing the digital platforms to measure and track these metrics. For instance, as I’ll share in more detail below, the fintech Urgentem provides granular carbon emissions data for thousands of global companies—to help them benchmark their performance.
Climate risk assessments. Another related obligation for listed companies is to assess and manage their risks. Climate risks can affect business models and practices, and so companies need to have clarity on the nature and size of those risks—both for their own purposes and for insurers.
Fintechs can provide climate data that is highly relevant here. For instance, data that hasn’t traditionally had a place in businesses, such as weather data, geoimagery, and hazard forecasts is increasingly being deployed in these climate reports thanks to fintechs.
Plus, they’re using innovative tools, including AI and machine learning, to manage the large amounts of data that these new methods produce. For instance, Pelt8—a fintech we’ve invested in at Tenity—helps Swiss SMEs meet their ESG targets with its data analytics platform.
Digital investment solutions. Fintechs don’t only collect data—they can provide the platforms on which investors of any size can invest more sustainably too.
By integrating ESG factors into investment portfolios, fintechs are enabling institutional investors to align their strategy with more sustainable perspectives. Meanwhile, through impact investing, they’re helping consumers act more sustainably with their own money too.
Carbon offsetting and trading. Carbon offsetting is a way for businesses to compensate for the carbon they emit, by way of carbon credits.
Fintechs can play a role in providing the infrastructure for this market. As businesses need to report on the emissions of their entire supply chain, fintechs can enable them to better centralise their carbon information.
One interesting way that fintechs are transforming the carbon market is through the use of blockchain technology. Cryptography can provide timestamped data on each transaction, which can improve the transparency of the market in general.
Lending. There’s long been a digital deficit in lending, particularly in the way that customers are verified and risk is measured. Now, though, we’re seeing funding growth for businesses that are providing new forms of verification and validation.
For instance, UBS recently partnered with NORM, an energy solution provider that helps assess the energy efficiency of buildings. With this partnership, NORM creates data-based property renovation packages that are then financed by UBS.
What’s the future of fintech and sustainability?
The above trends are becoming fast established within the sustainable finance space. But as a startup accelerator that works with a lot of preseed fintechs, at Tenity we’re also getting insights into some of the trends that will transform the industry in future too.
Here are some of the most exciting trends we’ll see:
- Decentralised finance will expand further into sustainability. Blockchain is already a much talked about technology in the fintech innovation space, with decentralised finance and web3 already impacting the space through crypto, peer-to-peer transactions and more.
But what we’re seeing now is fintech companies that are bringing blockchain to green finance. In future, for example, I expect to see climate projects funded by decentralised platforms. It can democratise green investment and make it easier for small businesses and consumers to access returns on this industry’s growth. - Sustainable assets will be tokenised. Tokenisation refers to the representation of physical assets with digital tokens, which can then be fractionalised and sold in smaller units. This is another web3 trend that we’re seeing develop in green finance.
This would enable nature itself to be turned into a tradable asset, which could give people a financial stake in its protection. Plus, it could also increase liquidity in the market overall, to make green investment more accessible.
- Artificial intelligence will play a larger role in climate reporting and analysis. There are many ways that AI could continue to play a role in climate fintech—and there are no doubts that it will. For instance, I expect to see it enabling the optimisation of energy usage through smarter building management, and improving supply chain transparency through better reporting and analysis. However, given the excitement around AI in general, it will be used in many other ways too.
- Climate tech will become embedded within existing financial systems. Rather than providing an entirely new system or set of tools, climate fintechs are more likely to embed their technology within existing processes and digital payments.
So, we’re likely to see climate action become embedded directly within financial transactions. For example, credit card purchases could automatically contribute to carbon offsetting. But we can imagine ways in which other processes—for instance, KYC and compliance—are done in a more sustainable way too.
- Fintechs will offer sustainability as a service. Given that incumbents in the financial sector have so much to do already, I imagine that fintechs will soon offer a service in which they manage all of a business’s sustainability concerns.
Most likely, this will be built on the software-as-a-service (SaaS) model. Fintechs could provide a platform where corporates can measure and report on climate data, spot opportunities for decarbonisation, offset their emissions, and more, all in the same place.
How Deedster, Urgentem, and Verdant Data are enabling corporates and consumers meet their climate goals
In this article, I’ve sketched out some of the key trends I see in the fintech industry. But now I want to show you some of the specific fintechs that are active in green finance.
At Tenity, we work with many different fintechs who are innovating in this sector. Here are two that we’ve partnered with in the past.
Urgentem is a provider of climate risk analytics and carbon emissions data. It helps its clients to meet its obligations for emissions reporting and to track its alignment with climate goals. Urgentem provides extensive granular-level data on the largest 5,000 global companies, with additional modelled data on 30,000+ securities.
In 2022, Urgentem partnered with SIX, the Swiss Stock Exchange and a global aggregator of ESG data. Since then, the fintech has been acquired by ICE, the US multinational.
Deedster is a Swedish fintech that specialises in climate footprint calculations. At Tenity, we helped it to partner with SIX bLink, the Swiss open banking platform, to offer a CO2 calculator to its banking clients.
This partnership led to a successful proof of concept that used anonymised real-life data to build an API-based fintech solution for private customers who wanted to track the CO2 emissions of their investments.
Verdant Data is a Swiss startup that uses process mining to help businesses fulfil their ESG requirements and meet their net zero ambitions. It spots inefficiencies in businesses’ processes and finds opportunities for high-impact sustainability improvements.
Verdant Data joined the Tenity Zurich Fintech Accelerator Program in September 2024, among 12 other promising startups.
At Tenity, we’re always looking to hear from new fintech startups in the sustainability space. For example, along with Commerzbank, in September and October 2024, we’ve recently run the Joint Innovation Accelerator for Sustainable Finance, to support sustainable fintechs in Germany.
To stay in the loop about our accelerator programmes, visit our programmes page.
Find out more about how fintech is powering the green transition
In this post, I’ve given you a glimpse into the world of sustainable fintech, including the trends we expect to see in future and some of the startups making an impact.
If you want to know more about climate fintech, or you’re interested in following other fintech trends, we can help. Get in touch with us to find out more.
