10 October 2022 |

Climate Fintech: How Impactful Is It?


Climate change is one of the significant barriers to financial stability

Environmental disasters harm an average of 200 million people annually – making climate change a substantial reason why millions are constantly financially excluded. 

Today, we’re seeing the havoc of climate change caused by Hurricane Ian as death tolls soar. 

Changing consumer behaviors – particularly with Millennials and Gen Z besties– are leading the cultural zeitgeist to shift sustainability in products they use from a “nice to have” to “absolute necessity.”

But these hyper-niche fintech companies are limited.

There’s AspirationGreenpennyAndoJoro, and Stripe Climate, to name a few. 

And now, banking fintech Future steps in after announcing its $5.3M seed funding to pay consumers to reduce their carbon footprint.

How it works

Future’s platform aims to reward users for making ‘climate-friendly’ purchases. 

In and of itself, that’s an interesting rabbit hole to jump down. 

Who is the arbiter of what constitutes a ‘climate-friendly’ purchase?

What qualifies? 

Consumption in most forms involves some form of extractive or emissions-producing activity, whether embedded in the product or owing to how it and all the materials that went into producing it are transported worldwide.

Here’s how Future breaks this down. 

On their site, they note that they “…define a purchase of a product or service as green if it has a significantly lower carbon footprint than the most common alternative.” 

Purchases that match this criterion earn users’ ClimatePoints’ (one point per cent).

Based on that criterion, here are some activities that qualify and earn users up to 6% cash back:

  • Public transit 
  • Thrift stores and secondhand marketplaces
  • Shared mobility (if you’re in NYC like me, think Citi Bike)

You might wonder why some impactful consumer choices aren’t on the list, like buying plant-based meat instead of beef

It would be hard for Future to reward users for buying a meat alternative in a grocery store because there’s no access to that granular of data when they use their card. 

Like any other card, merchants only send Future details about their store, like a merchant category code

If you shop at Whole Foods, the store probably shows up as ‘5411‘ for Future, classifying it in the “Grocery stores and supermarkets” category. 

This dynamic constraints Future’s system a bit. 

How future-forward is this?

A bigger question that I often come back to is how much impact changes in consumer behavior drive on their own. 

In the grand scheme, the answer is ‘not all that much,’ and not enough to slow climate change. 

That requires systems and industry-level change

Putting the onus back on consumers isn’t necessarily the right way to get them involved. But unfortunately, oil companies have long been hard at work with marketing campaigns that do just that

To this end, I’d caution Future against one of the bold taglines on their site. “Make the fight against climate change personal” veers dangerously into a similar type of message.

I’m not suggesting that consumer behavior changes can’t help

On the contrary, impactful changes, like not eating beef, can make a difference when scaled

Even if Future’s platform can’t necessarily reward you for buying plant-based meat alternatives because of the merchant categorization challenge we noted earlier, it helps move the needle.

And every move toward progress makes a difference.  

Climate change is complex, and it can be hard to understand what behavior changes help; well-aligned incentives can help steer consumers in the right direction. 

Changing Behavior Meets Climate Fintech

We are an interconnected planet, as we’ve seen over the past couple of years. 

Not only are regions interconnected, but people of different statuses of society are connected, and our issues and challenges are mutually reinforcing.

Exacerbated inequities and moments of social reckoning over the last two years have more users demanding they use their wealth and access to technology to push for change

Our society is at an inflection point.

Concerns over the planet are nothing new, but now it feels like no one can be at the table in the finance or tech world without thinking of climate change or having the ability to address societal issues

That culture shift is here to stay. 

There are companies that dedicate resources to using finance for good

Much of the push has been via ESG, or the framework for assessing how a company performs in critical areas, including its positive impact on customers and communities it serves, how it deals with social unrest, climate change, and racial and gender inequalities. 

This is a part of the many reasons why representation in fintech is critical. 

Diverse groups have always had to be prudent in managing resources. They have to thinklook ahead, and plan for risks

For our industry to prosper, we need that

Even if imperfect, action needs to be decisiveintentional, and taken early

And that early action is worth a lot more. So we have to do a lot more. We must front and load our efforts to address a resilient future and inclusive society.

So when banking fintech Future announced its $5.3M seed funding to pay consumers to reduce their carbon footprint, I got interested in the future of climate fintech and asked many questions

A bigger question that I often come back to is how much impact changes in consumer behavior drive on their own. 

Perhaps most importantly, the movement Future represents may be the most impactful component of this story. 

Climate fintech startups raised $1.2 billion in 2021. 3x higher than all previous years combined. Before 2021, all 292 climate fintech startups identified raised $400 million.

The burgeoning green fintech ecosystem, including Future, illustrates that consumers increasingly demand options from their financial partners.

And really, all the companies they interact with need to align with a more sustainable, climate-friendly ‘future.’

39% of Gen Z and 42% of Millennials are willing to pay a premium for sustainability, according to Simon-Kucher’s global sustainability study in 2021. 

According to Forrester, Gen Zers and Millennials who live in cities and have college or advanced degrees are the most likely to pursue green banking products — and to make brand decisions based on environmental considerations about the company or product. 

The topic of green banking is also top of mind with the passage of the Inflation Reduction Act, which incentivizes energy-efficient home upgrades and electric and hybrid vehicle purchases.

Plus, at least a third of all consumers are very interested in checking accounts with:

  • Rewards for purchases made from environmental friends
  • Debit cards made from renewable or upcycled materials
  • Policies that prevent deposits from funding fossil fuel exploration or production
  • An option to plant a tree with every roundup

Helping consumers feel empowered and getting them active is a significant first step. 

If that helps assuage anxiety and leads to additional steps that culminate in them working for a climate tech company or as an activist, policymaker, or politician, down the road, there’s significant power in that.  

For companies to survive, they must innovate and transform their business practices to become sustainable now rather than later, as the speed of change will continue to accelerate. 

Caring for financial inclusion and equity means caring about the future of our planet. 

Climate change is causing an increase in poverty in various ways worldwide, with an estimated 132 million people falling into poverty because of the effects of climate change by 2030.

Financial inclusion, through fintech, could aid in the resilience of households, individuals, and companies in the case of a rapid climate event or the gradual effects of changing rainfall patterns, rising sea levels, or salter water incursion. 

Insurance, savings, credit, money transfers, and new digital distribution channels can help victims of climate change and those in charge of dealing with the latest environmental realities. 

As a fintech community, we should collectively have a deep-seated desire to have a good influence on the planet and its people. 

Our goal is simple: Leave the world in a lot better shape than we found it.

And change starts with how we plant trees for those in the future whose shade we may never know. 

(This story is in collaboration with fellow Workweek friend and Climate Tech guru Nick Van Osdol. To learn more about climate tech be sure to sign up for his dope newsletter, Keep Cool, here!)