15 March 2022 |

Fintech to Drive Net-Zero Economies

By Nicole Casperson

CLIMATE FINTECH

Fintech to Drive Net-Zero Economies 

Technology is not only making it easier to access and manage financial tools but also helping us create a more sustainable future. 

And the interest is coming from all sides: Mission-driven fintech operators, investors hungry for change, VC funding, and even global food companies are working to develop sustainable practices via technology.

In concert, all of these movements could spark some real positive change. And the money is there – climate fintech startups raised $1.2 billion in 2021. 3x higher than all previous years, combined.

What’s Up

This sparked my interest: Global food companies like JBS have invested in a range of next-generation innovations that have been critical to making food supply chains more sustainable.

This goes beyond just energy efficiency. For example, JBS is looking at biodegradable packaging solutions to reduce plastic and has been evaluating advanced water recycling systems.

It’s not just suppliers, but finance companies are also waking up to the fact that environmental, social, and governance (ESG) strategies are critical to a future of sustainability and profitability. 

And they are tapping fintech companies to make it happen.

For example, last year BlackRock acquired fintech startup Clarity AI, an ESG data provider. JPMorgan acquired fintech company OpenInvest last year. The platform helps financial pros report on values-based investments.

Independent fintech companies like Clim8invest, Circa5000, and Physis are also promoting sustainable investing. (Physis is also female-founded – 👋🏽 Stefania Di Bartolomeo).

Companies like Helios and Tomorrow are combining mobile banking services and ensuring customer deposits are only invested sustainably. 

Why it Matters

Growing inequities, moments of social reckoning, and a broad recognition that the decarbonization of the economy must begin have spurred more investors than ever to use their wealth to push for change. 

Companies that are able to cater to that future of sustainability will thrive. Plus, there’s clearly a demand for more fintech companies to cater to climate change, particularly in the U.S. 

The two largest climate fintech funding rounds last year were announced by U.S. startups: Xpansiv (a marketplace for carbon credits) raised $140M, and Persefoni (a carbon accounting platform) raised $115M. 

Key areas where VC funding is funding climate fintech: 

  1. Carbon Accounting: systemic tracking and analysis of emissions 
  2. Carbon Offsetting: active compensation of CO2 emissions. 
  3. Impact Investing: leveraging investments to achieve a positive impact
  4. ESG Reporting: enhancing data and establishing a much-needed standard
  5. Climate Risk Management: integrating climate risk into financial products
  6. Sustainable Banking: making money work for our planet 
  7. Supply Chain Analytics: tracing emissions at every stage of production
  8. Impact Financing: financing climate-positive impact opportunities
  9. Carbon Credits Trading: creating an effective carbon market 
  10. DeFi for Climate: the infrastructure for the tokenization of carbon

Clearly, climate fintech is still in its early stages, but with only 11 years left to prevent irreversible damage – we gotta move a bit faster.  

If climate tech is your thing, be sure to check out Workweek creator and friend Nick Van Osdol newsletter Keep Cool and upcoming podcast. 

CRYPTO

Tax Szn Is Coming  

TL;DR: It’s starting to feel like spring – that means we’re nearing tax season, and a lot of investors are likely going to be surprised to see tax ramifications for all the crypto and NFT they’ve purchased. 

Why It Matters

Non-fungible tokens are likely considered collectibles, which carry a 28% top federal tax rate on long-term capital gains, according to tax experts. By comparison, appreciation in Bitcoin, Ethereum, and other digital coins is subject to a 23.8% top rate. 

The thing is: Do retail investors know that? I turn to fintech companies to take the responsibility to ensure their users are taken care of when it comes to the complexities of crypto, NFTs, and tax season. 

I’m optimistic we can set clearer guidance for investors. Fintech startups like Reconcile Money give me hope – it’s a platform that gives everyone the same level of tax advice that Wall Street investors receive.

There are 20 million Americans in the last two years that became stock and crypto traders for the first time. But only ~30% of these investors actually have an accountant or advisor to rely on for professional tax help, which explains how so many new investors got burned when filing their taxes last year – like the Robinhood trader who owed $800,000 in taxes but only made $45,000 in profit. 

Reconcile Money founder and CEO Jaimin Desai noted these points in this dope Twitter thread

Reconcile Money, in a nutshell, helps users track their crypto transactions and get a real-time tax breakdown throughout the year. That way, investors don’t find out they owe thousands of dollars in taxes after filing in April. 

TECH STOCKS

Welcome to the Bear Market 

TL;DR: Cheers to the tech-heavy Nasdaq 100, which just entered its 7th bear market since 1990 ðŸ§¸

Big tech like Apple, Microsoft, Amazon, Google parent Alphabet, and Meta have all sank – marking the Nasdaq 100’s bear market, which is measured as a decline of 20% or more from a 52-week high.

The Russia-Ukraine war is the latest risk to hit markets following inflation and the upcoming rise in interest rates that have largely hit high-growth names. eToro analyst Callie Cox broke down tech investing’s balancing act for us.  

Why it Matters

A lot of new investors have yet to experience a bear market, given that tech stocks have been hot since 2020.

Tech stocks are being re-rated based on our current environment and the upcoming interest rate hike. Most investors buy growth stocks based on future earnings and when rates rise the value of those future dollar earnings falls relative to dollar earnings today. 

As Callie said: Growth stocks and rising rates are like fire and ice – they don’t mix well together. 

Diversification could be beneficial here, so it’s a good thing there are a ton of fintech apps out there able to help with alternative investing.

Think Yieldstreet, Vinovest, and I recently met Founder and CEO Henry Yoshida of Rocket Dollar, a web platform that lets people invest tax-advantaged retirement dollars into private alternative investments.

The relationship between fintech and traditional market structure intrigues me for these main reasons:

  1. Educational component of helping fintech startups understand market structure
  2. The integration of fintech startups into the market 
  3. Adoption of cloud data delivery to bring new technologies onto existing platforms

WTF ELSE?

  • Yieldstreet launches third art equity fund featuring Banksy and Murakami
  • Prominent crypto executives assess current market and share future predictions
  • Binance has signed a memorandum of understanding to buy Brazilian securities brokerage firm Sim;paul Investimentos
  • Growth financing platform Capchase raises $80M Series B funding
  • E-Commerce billionaire Sachin Bansal’s Navi files for $440M IPO
  • Visa finalizes its $2 billion deal to acquire Swedish fintech Tink 
  • Stripe payments accept crypto again and support NFTs