The recent natural disasters in Morocco and Turkey, to name but two, have highlighted that drastic efforts are swiftly needed to put a stop to global warming. And all sectors of the economy must unite behind these critical efforts.
This includes the financial services sector, which has the resources to ensure that sustainable investments and the creation of sustainable business models are truly prioritised.
The intensifying effects of climate change are presenting unparalleled challenges to the global economy, with the United Nations (UN) reporting that climate-related catastrophes are now resulting in an annual average economic loss ranging between $250bn and $300bn. A study by Nature Communications, meanwhile, has predicted that if current trends continue, global GDP will plummet by 10-14% by 2050.
Fintech has the power to change the game
Following the UN’s annual climate change conference – COP28 – in Dubai, it was heartening to read about COP28 UAE TechSprint, which is encouraging financial innovators and developers from across the private and public sector to fast-track innovative technology solutions that help address challenges in green and sustainable finance.
This timely new global initiative will draw on artificial intelligence (AI), blockchain, the internet of things (IoT), and sensor technologies to address defined problem areas, including sustainable finance reporting, verification, and disclosure across the financial services industry – as well as auditing and enhancing transparency, traceability, and accountability.
COP28, which marks a crucial juncture in the global climate dialogue, united leaders, policymakers, scientists, and businesses from around the world – and is therefore the right place to showcase the power of fintech, which is ultimately all about collaboration.
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The latest technologies, especially data management systems and AI, are becoming essential in driving intelligent, sustainable decision-making, revolutionising the use of ESG software and enhancing sustainability reporting.
Climate fintech can be considered a wide-ranging area, encompassing everything from data-driven financing through to the application of blockchain technology to aggregate, distribute, and manage decentralised energy supply and demand.
It has huge potential to support and accelerate the growth of climate tech initiatives by providing the necessary financial support, data analytics, and risk assessment tools. It is becoming an integral part of the solution to combat climate change.
Addressing gaps in the green finance market
To focus in on one important area, climate fintech is enabling the efficient flow of capital towards sustainable projects.
Through fintech platforms, investors can now link up with green bonds and renewable energy projects, facilitating the financing of low-carbon initiatives at true scale. Additionally, AI-powered tools can analyse ESG data to empower investors to make more informed decisions that are aligned with climate goals.
These forward-looking fintech platforms are filling a gap and meeting a huge unmet need. A recent survey by Ecologi revealed that 91% of SME owners in the UK think its important to be sustainable, but they struggle due to a lack of guidance (42%), efficient carbon footprint data (37%), and time (37%).
With entrepreneurs scratching their heads, fintech platforms have taken on the baton, and are using their technology to help them – as well as to help investors identify and invest in companies taking steps to reduce their carbon footprint and combat climate change.
Liberis’ Cashback for Green initiative, for example, is our own response to the growing appetite from SME customers for green funding solutions.
Developed in conjunction with Liberis’ strategic partners and launched in July 2023, Cashback for Green is giving small businesses the opportunity to receive cashback on their factor fee if their funding is used for green investments and purchases.
From sustainable supply chains and transport projects to energy efficiency and educational programmes, there are a wide range of green investments that business owners can devote their funding to. These opportunities will allow business owners to demonstrate their commitment to being more environmentally responsible, and revolutionise how they approach green funding.
The initiative has been specifically designed to help SMEs gain a sharper competitive edge whilst also preparing for a low-carbon future. We are already seeing that small business owners are making green investments that they may otherwise have been forced to postpone.
The sustainability market is growing exponentially, and small businesses that prioritise eco-friendly practices are increasingly valued by consumers. They will also be able to better meet government regulations as new sustainability laws are introduced for businesses.
Let us hope that COP serves to further shift the dial from talk to action, and that we see the fintech sector’s agility shine through in the ongoing battle to mitigate the effects of climate change.
Rob Straathof is CEO, Liberis