In a time when more and more people are pushing for sustainability and being eco-friendly, even the financial sector is joining in. Before, making money and taking care of the environment were seen as separate things. But now, a new kind of financial tool has appeared: Green Fintech products. These products use both technology and eco-friendly practices, appealing to investors who care about how their investments impact the planet, not just how much money they make.

The importance of green fintech was underscored in May 2022 when the Green Digital Finance Alliance and the Swiss Green Fintech Network unveiled the world's first classification system for green fintech. They released a document, available for public access, that outlines eight distinct green fintech categories. Delving into these categories not only provides insights into the growing world of eco-fintech but also uncovers potential opportunities for both established players and new entrants.

In this article, I aim to shed light on the large number of sustainable investment products that have emerged and the vast potential that lies ahead. Whether you're an investor seeking to make a positive environmental impact or a fintech enthusiast keen on the latest trends, there's much to discover in this evolving landscape of green fintech.

The green perspective: the main categories

The green fintech classification design aims to align with established fintech taxonomies to ensure global applicability and ease of self-identification for fintechs. The outcome is a comprehensive set of eight commercial green fintech categories, each supplemented by real-world examples, showing tangible business models available in the market. Let’s review each group in a bit more detail.

Green digital payment and account solutions

Payment and account solutions with integrated green features offer an enhanced payment experience that promotes sustainability: these products often provide automated carbon, plastic, or water footprint accounting with the help of transaction data.
The list of examples encompasses several companies. PayGreen is the solution whose partner shops take responsibility for greenhouse gases caused in the course of their business activities, whereas Doconomy and Evolytiq enable banks and financial services to embed transaction-based footprinting, personalised climate insights, and give its clients access to carbon credits.

Green digital investment solutions

Digital platforms in this category offer automated, algorithm-driven financial planning and investment services centred on green initiatives with minimal human intervention.

Swiss-based Inyova as an example focuses on creating personalised investment portfolios that align with an investor's values and impact goals. Inyova emphasises two main categories in their investment methodology:

Handprint: This category comprises 12 high-impact topics that focus on companies making a positive impact on the world, including renewable energy, energy-saving technology, clean water, circular economy, sustainable forestry, plant-based food, healthcare, digital champions, transport of the future, Swiss champions, advancing education, and social justice.

Footprint: Inyova also allows investors to include four footprint topics in their portfolios. These topics address areas related to a company's business practices. The four footprint topics are low carbon emissions, gender equality, fair pay, and human rights.

Inyova's investment engine tailors portfolios to match an investor's chosen criteria, offering a transparent and personalised approach to green investing.

Digital ESG data and analytics solutions

Solutions for automated green data collection and analytics focus on integrating sustainability metrics into the financial sector. They encompass technologies that reinforce credit scoring through the inclusion of green data, enable automatic ESG evaluations of companies and funds, and facilitate digital green indexing. To illustrate, Impaakt provides a platform where contributors can assess and rate the social and environmental impact of publicly traded companies. The platform's collective assessments generate impact ratings that help investors and the public make more informed decisions about where to invest their money. Another company, Novisto, develops a solution that empowers corporations to collect, analyse, and report on their ESG data and performance.

Green digital crowdfunding and syndication platforms

These digital platforms serve the purpose of raising capital from a vast array of individuals or institutional investors to support new environmentally friendly business initiatives or projects. These include green equity crowdfunding, green loan crowdfunding, and green donation crowdfunding.

For instance, Trine enables individuals to invest in loans directed towards solar energy companies in emerging markets such as India, Vietnam, and Chile. By doing so, they can make an immediate positive impact while also earning a fixed return on their investment. The same is true for BetterVest, RaiseNow and Ulule. The funds raised are utilised to support local solar energy companies, ensuring the provision of clean electricity where it is most needed. The loans are repaid on an ongoing basis, allowing Trine's clients to profit through interest earned.

Green digital risk analysis and insure-tech solutions

These solutions are designed to enhance green insurance offerings and reduce physical climate and nature-related risks. They include tools for automated risk assessment and monitoring, digital green insurance platforms, dynamic pricing and underwriting for green assets, and smart contracts for efficient green claims processing.

To exemplify, EarthScan, powered by Cervest, is a comprehensive climate risk assessment product. It provides a holistic view of climate-related hazards such as floods, droughts, and extreme temperatures, spanning the years 1970 to 2100. This tool allows users to analyse data at various scales, timeframes, and locations, for both individual asset evaluations and portfolio-level decision-making.

Green digital deposit and lending solutions

These are digital financial solutions employed to fund projects that promote environmental benefits. They encompass digital loans for financing such projects or loans that incentivise eco-friendly behaviours. Some common applications include green digital loans, loans tied to environmental progress with automated tracking, and digital mortgages designed to support environmentally conscious initiatives, as they do at Hemma.

Green digital asset solutions

These innovative platforms specialise in tokens and cryptocurrencies designed with environmentally conscious features. It offers a blockchain capital market infrastructure tailored for green applications, including rewards in the form of green utility tokens for reducing carbon emissions, tokenised assets like carbon credits and biodiversity offsets (like Toucan, who provide tokenised carbon credits), and green cryptocurrencies intended exclusively for eco-friendly purchases. Other than that, it supports green Security Token Offerings (STOs) with a framework for issuing tokens that facilitate transparent proof of environmental impact reporting.

Green regtech solutions

Green regtech solutions utilise technology-driven innovation to build regulatory compliance and reporting tasks within regulated institutions and financial supervisory authorities. It empowers users to analyse disclosed environmental and financial data with digital technology, automatically determining the degree of alignment with green taxonomy for financial products such as funds. Additionally, it leverages AI's Natural Language Processing capabilities to autonomously assess the quality of green banking disclosures, which ensures transparency and efficiency in compliance efforts. In this sense, Greenomy is one of the most outstanding examples. It is a Software as a Service (SaaS) platform that assists businesses and financial institutions in assessing and enhancing their sustainability performance in alignment with the sustainability standards set by the European Union.

From digital payment and account solutions to risk analysis, crowdfunding platforms to digital assets, Green Fintech offers a spectrum of tools and products that allow investors to align their financial objectives with their environmental values.

So whether you're an environmentally conscious investor looking to make a positive impact or a fintech enthusiast eager to stay abreast of the latest trends, the evolving landscape of Green Fintech offers a myriad of opportunities and avenues for growth. In the ever-evolving world of finance, Green Fintech represents not only a commitment to responsible investing but also a promising journey towards a greener, more sustainable tomorrow for us all.

Green Fintech: Bridging Finance and Sustainability