Is Fintech enabling the Green Economy?
REVISED AUG 12, 2020
Almost three years ago, I wrote my first blog article on “Green Fintech”. I was wondering whether fintechs could play a role in making not only the global financial system inclusive, but also the global economy green. At that time, I found interesting ideas, particularly in the realm of Clean Energy Money. But not much in terms of concrete actions. (See my original blog article: Green Fintech.)
Things have changed for the better. The fast growing popularity of Environmental, Social, and Governance (ESG) factors in measuring the sustainability and societal impact of investments (for a number of reasons, including Greta Thunberg) has helped.
In this article we cover a quick “state of green fintech”, a recap of what we think are some of the most promising ventures in the world. It includes start-ups we already introduced in some relatively recent blogs as well as new ones.
Blockchain Solar Start-ups
The first blockchain solar start-up (or one of the first). It is a rewards program for solar electricity generation. Backed by a cryptographic proof of work and a third party verified meter reading. A SolarCoin equals 1 MWh of solar energy production and is specifically targeted at individual households, who install solar panels in their roofs, and commercial solar electricity producers.
Sun Exchange (South Africa)
This blockchain solar energy start-up does not trade power but instead crowdfunds solar projects around the globe. They have several successful projects already completed, including building solar panel roofs in African schools and elephant reserves. Through Sun Exchange, you can purchase “solar cells” that you can allocate to the project of your choice from one on their website.
(For more projects like these, see: Top 5 Blockchain Solar Energy Start-ups.)
Tokenised Carbon Assets
Veridium Labs (Canada)
The company brings carbon credits onto the blockchain. It is working in partnership with IBM and using the Stellar blockchain to tokenise carbon credits traded on markets. The token is backed by carbon assets verified by third parties. In addition, Veridium calculates the number of carbon credits a company needs to buy/ generate to provide enough carbon offsets for its footprint.
(Stellar has a much lower energy consumption than Bitcoin and most of the other main blockchains.)
The company is a blockchain based carbon removal marketplace. On the supplier side, it verifies that a business has performed activities that removed carbon dioxide from the atmosphere. Nori then issues an authenticity certificate to the supplier. Anyone can sign up as buyer to buy certificates from the suppliers. The main benefit of this peer-to-peer marketplace is low bureaucracy.
(For more projects like these, see: Projects in the Blockchain Carbon Credit Space.)
In October 2018, The FCA, the UK financial regulator, launched the Green FinTech Challenge. It wants a financial services market that responds well to the challenges and opportunities of climate change. The FCA also wants to protect investors from ‘greenwashing’, i.e. it wants to ensure that the products labelled sustainable by green fintechs are genuinely green. However, it acknowledges that assessing this is complex.
In 2019, the initiative has accepted nine firms developing innovative products and services to assist in the UK’s transition to a greener economy. Here are two we found particularly interesting.
Sustainability Exchange (UK)
A blockchain-based platform for ESG focused institutional investors. It rewards users with ESGX tokens if they correctly predict ESG performance (measured by a ESG momentum indicator) of companies included in indices such as S&P 500, TSX 60 and FTSE 100. It aims to incentivise investors and companies to prioritise projects for maximum impact on ESG performance ratings.
A blockchain-based platform that that decentralises the global energy market. It rewards both consumers and organisations with ETK tokens to incentivise energy efficient behaviour. It uses AI to procure energy and assess market data to identify the optimum time to buy or sell energy. Its aims to create transparent global energy markets, making energy more affordable for all.
The FCA initiative offers support via a range of services: The Regulatory Sandbox, Direct Support, The Advice Unit and Bespoke Green Finance cohort engagement.
The state of green fintech is better than 3 years ago, but a lot more needs to happen. And faster. We will continue to follow this space and do so on a more regular basis. We want to do our bit to assist in the world’s transition to a greener and more humane economy in the post-COVID era.
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