How climate fintechs are paving the path to sustainability
A new subset of fintechs is emerging, dedicated to providing financial solutions that can address the most pressing challenges in sustainability. Cristina Criddle, Financial Times technology reporter, speaks to David Rubin, Head of Visa’s Component and Partner Hub, about the potential of these companies and how they can effect change.
Why do you think we have seen an increased appetite for climate fintechs?
Particularly since COP26, we’ve seen accelerated interest in the climate space and it's creating an opportunity for companies to think about the market problems that are out there right now. We see a great opportunity for smaller companies to come in and look at a specific area and then, working with larger companies like Visa, amplify their voice and increase the reach of their climate solution product.
What are some of the applications that come under the umbrella of ‘climate fintech’?
There are four or five different types of companies that we work with. The first is all about working with consumers and helping them understand their impact, moving towards the idea that it's not necessarily just about reducing consumption but being more sustainable in your consumption and how an individual’s behaviour changes to facilitate that. Off the back of that there are two additional ways, directly in the financial services world, that someone can affect this. One is through ESG investing - so making sure my investment portfolio is sustainable - and the other is around offsetting - i.e., what can I do to offset my emissions. In addition to that we see a few other applications. There are a lot of companies that are getting into the carbon market; so, how do I trade these carbon credits? Finally, we also see a whole raft of companies that are looking to help other companies manage their drive towards net zero.
How can fintech start-ups best affect change in driving the adoption of sustainable practices?
We often talk about looking at positive impact. What we are trying to do is create a baseline and give the consumer an opportunity to understand where they are on that baseline. Data has to be credible and open source and evidence how making a particular change in behaviour will have positive sustainable impact. It is our ambition to move people on that journey from where they are today which is potentially not having a very sustainable way of living to a much more sustainable way.
And that is mainly around carbon footprint and the consumer taking actions but to make real changes you need governments and businesses. How can you create that kind of change as a start up?
Start-ups have the opportunity to remove some friction in adopting these positive behaviours. For example, there is a company called Just Charge that allows people who have installed charge points in their homes to monetise that investment. So, when that charge point at somebody’s private home, is sitting there and is not being used, Just Charge offers a solution for others to benefit from by putting that charging point on the market in that area. It helps the owner by selecting a price point that is slightly below what might be found at a commercial charging point and helps the consumer move towards a more sustainable lifestyle.
I guess part of the problem with such solutions is getting them to scale, how do you navigate that?
Through the reach of payments. Payments are pervasive. In everything we do we need to pay for things. For the moment, it’s a monetary payment, and what we’re seeing especially in the sustainability space is that that idea of value is changing over time. To this end, there are a couple of things that we are looking at. One, is through the payments space - how do we help consumers, whether through nudge theory or benefits, move towards that positive change. For example, I know my spending will help contribute to conservation efforts or clean water provision. And secondly, when we do move to these new value exchanges, how can we make them safe, secure and robust as we have with card payments.
So, collaboration is needed, but when we have all these companies competing with each other, how are you going to have a clear mandate?
A lot of this is about access to information and making sure that, that is open, and everyone can see it. There could be small differences between some of the providers but if the concepts are there, then there should be broad alignment despite the individual use of solutions. For us, what we have seen often is that competition breeds innovation, so if you didn’t have a lot of people in the space then people could get complacent, and some companies may not move as fast as they need to. There's good competitive tension often and that will drive a lot of innovation.
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