The Color of Money – The State of Green Fintech

Since the signing of The United Nations Paris Agreement on climate change way back in 2015, countries all over the world – excepting the USA which withdrew from the accord under the leadership of 45th President Donald Trump – have been working towards the green targets set out in the legally binding document.

One only need look at the news to fully understand the devastating effect manmade climate change is beginning to have on our planet. From the Swedish mountain which is shrinking by two meters per year, to the wildfires which have ravaged California, Europe, and Australia, it feels like nature is hitting back at mankind in a big way. And all the best experts predict this is only the beginning.

However, all is not doom and gloom. The latest reports from the IPCC and the UN state that, while the situation is dire, there is still time to mitigate the worst effects of climate change. If we act now, we may have a chance to halt or even reverse the damage.

Fintech

One of the main facets of The Paris Agreement is providing a framework for financial, technical, and capacity building support to those countries which require it.

“The Paris Agreement speaks of the vision of fully realizing technology development and transfer for both improving resilience to climate change and reducing GHG emissions. It establishes a technology framework to provide overarching guidance to the well-functioning Technology Mechanism. The mechanism is accelerating technology development and transfer through its policy and implementation arms.”

Technology has a major role to play in the fight against climate change and, as fintech is one of the largest subsectors in the field, it stands to reason that it has a particular responsibility – especially in the Asia-Pacific region where so much of the world’s fintech innovation is occurring.

In fact, the Monetary Authority of Singapore has recently several initiatives to help boost green finance in the region. A taskforce has been convened to drive these initiatives and work with financial brands and institutions to develop new and greener ways of doing business – with fintech being a major focus of attention.

“GFIT’s initiatives to enhance climate-related disclosures and strengthen green capabilities will enable financial institutions to effectively develop green solutions and align their portfolios towards facilitating Asia’s transition to a low carbon economy,” said Gillian Tan, Assistant Managing Director (Development and International), MAS.

To coincide with the taskforce, MAS has also launched the latest round of its Global FinTech Hackcelerator. Now in its 6th year, the 2021 edition of the Hackcelerator will have a strong focus on green fintech solutions. Firms were invited to submit solutions to address 52 problem statements based on three key challenges:

• Mobilizing Capital – Increase access to capital for green projects or solutions.
• Monitoring Commitment – Enhance Investor and Financial Institution ease of monitoring sustainability commitments from issuers.
• Measuring Impact – Improve ability to measure impact of loans and investments against their stated sustainability goals. 

15 finalists will be selected from the applicants and paired with a corporate champion to develop their prototype. Each finalist will receive an SGD 20,000 cash stipend and be eligible for a fast-tracked application for the MAS Financial Sector Technology and Innovation Scheme Proof-of-Concept Grant of up to SGD200,000.

Finalists will also pitch their solutions at the “Demo Day” held at this year’s Singapore FinTech Festival. Up to three winners will be announced on 8 November, each receiving SGD 50,000 in prize money.

Singapore Fintech Association

These MAS initiatives have been met in kind by the Singapore Fintech Association, which has set up a Green and Sustainable Fintech Sub-Committee to meet the challenges of manmade climate change. The committee is working to four pillars – engagement with regulators, engagement with industry, nurture the development of the ecosystem, and talent development. Each corner will form part of the mission to foster the development of fintech solutions which drive capital investment towards an inclusive, net-carbon zero, and sustainable economy.

• Engagement with Regulators – Working with regulatory bodies to develop new ways of driving green fintech innovation, as well as market structure and practices in the sector, as well as acting as a middleman between the fintech ecosystem and regulators.
• Engagement with Industry – Organize events to promote green fintech and collaboration between fintech developers and the financial industry at large, provide market insights, and share key developments and mutual understanding of the needs and challenges faced in Green FinTech.
• Nurture Development of the Ecosystem – Work with various association to broaden the appeal and application of green fintech in the Asia-Pacific region, while facilitating the development of collaboration and growth in the green fintech space.
• Talent Development – Work with institutions within Singapore to promote green fintech and best practices and facilitate the adoption and nurturing of international expertise via knowledge exchange and attracting talent, and to make industry experts available for mentoring roles. 

Inclusivity

Of course, there are plenty of ways technology is helping make our cities and industries more environmentally sustainable, but one of the best ways green fintech specifically can help create a better world is by removing many of the obstacles preventing people from reaching their full potential.

The digital, and thus, financial inclusivity of individuals is crucial to making sure everyone has a fair and equal chance of thriving in this world. Only a little over half of the global population is an active internet user which means nearly 50% of the world does not have access to digital services.

While we cannot solve the world’s connectivity issues, thanks to fintech, people can gain better access to pervasive electronic payments, affordable cross-border remittances, timely health insurance claims, and holistic financial planning. Electronic payments are almost essential to modern life, and we need to create ways for more people to be able to pay for goods and services online.

Cross border payments are slow, expensive, and inefficient, yet many foreign workers in Singapore rely on them to send money home to their families. By making these payments faster and cheaper, we can significantly improve the quality of life for many thousands of people and their loved ones. The same goes for health insurance claims – getting ill should not come with the added pressure of worrying about when or even if your insurance will pay out.

Finally, fintech can help people better plan for their financial needs. Many banks these days have apps and other tools which make it easier for people to budget for regular outgoings, set money aside for savings, calculate credit opportunities, and more. By making these technologies more readily available, we can improve financial forecasts for everyone.

Final Thoughts

From climate change to financial inclusivity, green fintech has the potential to benefit the world and its people in so many ways. We still have a lot of work to do, and it can sometimes feel like we expend all our energy trying to convince decision makers the problem exists rather than working on solutions.

However, at least some governments and industry bodies, such as those in Singapore, are taking their responsibilities seriously. If more countries follow their lead, we may have a chance of pulling out of this environmental nosedive before it’s too late.