How fintechs can supercharge sustainability and gain consumer trust

It’s not easy being green, especially when environmental, social and governance (ESG) obligations are mounting amid an uncertain economic picture. But businesses can no longer ignore the voices of consumers worldwide who are demanding immediate and impactful climate actions – and this is where fintechs have a vital role to play.

The United Nations has declared 2021-2030 the Decade of Action, and is demanding that businesses take meaningful action towards a more sustainable future. In addition, investor pressure is building, with 82% of investors saying ESG needs to be embedded in corporate strategy, according to PwC data. Any business that thinks it can get away with ‘greenwashing’ is in for a rude awakening.

As the global push towards sustainability gathers force, the demand for fintech-driven ESG solutions is definitely out there – and growing.

According to KPMG, the market size for such solutions could surge from $21 billion in 2022 to more than $160 billion in the next five years.

But if this potential is to be realised, fintechs will need to pay close attention to how new regulations and reporting standards will impact their business.

Global pressure to stamp out greenwashing is building

It’s clear to see that government and regulatory demands for more ESG actions are intensifying worldwide. During 2022, several fines and remedial actions were imposed on companies found to have given misleading or incorrect ESG information, a prime example being the US Securities and Exchange Commission, which fined two financial institutions for misstating and omitting information in ESG disclosures.

Efforts to speed up ESG reporting standards are also ramping up. With the establishment of the International Sustainability Standards Board (ISSB) at the COP26 climate summit in 2021, and the release of data reporting and climate-related disclosure standards in June 2023, companies now have a consistent global framework for investorfocused sustainability reporting. Already, authorities in Singapore have acted by proposing ISSB-aligned mandatory climate reporting for listed and large nonlisted companies.

These new reporting standards should go a long way in easing one of the big challenges in the way of further ESG adoption – a lack of clarity over data. Research from McKinsey shows that a lack of data was one of the key reasons why companies aren’t able to properly assess ESG programmes when evaluating competitors, suppliers, and potential partners.

Incentivising ESG at the corporate level is being factored into remuneration and rewards policies, to motivate leaders and boards to do the right thing by their businesses, shareholders and their customers. This is unsurprising given the sharp rise of climate-focused litigation over the past few years – according to the London School of Economics, of more than 2,000 cases brought globally since 2015, around 15% were filed between the years 2020 and 2022.

At the same time, employees are increasingly demanding more ESG action from their employers. With a global skills shortage threatening to slow the pace of innovation, businesses are finding it harder to recruit and retain the right staff who can shape the future of fintech. They will have no option but to listen to the views of potential employees who want their social values reflected in the organisations they work for.

Rising consumer demand for climateconscious payment technology

As ESG moves up political and commercial agendas, fulfilling a growing consumer demand for climate-conscious actions is fast becoming a necessity for brand success. Younger Millennial and Generation Z consumers won’t hesitate to shun brands who merely pay lip service to sustainability – around 40% of Gen Z and Millennial consumers say that environmental impact is a crucial factor in their purchasing decisions

The good news is that the emergence of game-changing technology is enabling businesses and their customers to join forces and tackle climate change – and achieve sustainability goals together through innovative fintech solutions.

During the pandemic, we saw just how quickly consumers were able to switch from cash to contactless and digital wallet or in-app payments, helping to reduce paper usage across retail, hospitality, transport and other cashheavy sectors. And with less cash in usage, the carbon footprint linked to the transportation and disposal of cash and coins was reduced too.

While it’s great to see consumers and businesses embracing digital payments, there are those who still prefer physical payment cards. Here, solutions like ecofriendly payment cards and wearable tech made from recyclable materials can help businesses forge deeper connections with their customers through items they carry every day.

One of the ways businesses can take meaningful action and make positive impacts is by encouraging consumers to make climate-conscious purchases, with innovative tools like carbon calculators at the checkout that can help consumers reduce their carbon footprints.

One incentive that I have personal experience with, is ekko’s move to a green recyclable debit card and accompanying app, powered by our issuing and processing services. This solution enables consumers to see how their purchases and payment behaviour impact their carbon footprint and are incentivised to make more climate-friendly purchases, while contributing to plastic recycling and tree planting initiatives.

As AI and machine learning (ML) make their way into more business areas, they have incredible potential to gather, speed read and validate data quality, plus trace it to specific ESG touchpoints or programmes that can help fintechs to serve their customers with climate-conscious solutions. From a wider corporate/investor standpoint, AI and ML can analyse massive datasets in real-time and identify viable sustainable investment opportunities based on ESG data standards to enable better decisions and discover potential areas for development. Who knows? Maybe with these technologies, we are about to see the emergence of the first green fintech unicorns.

ESG needs an evergreen approach Companies that adopt ESG objectives across their business models will be better positioned to reach new customers and retain them. But ESG is not a tickbox exercise. Complacency is not an option. As new climate emergencies occur, and new risks to sustainability appear, ESG is a continual journey. Fintechs and their partners therefore need to keep their eyes on the horizon, and use the tools and data at hand to anticipate their next steps.

By measuring and reporting transparent metrics on governance, strategy, risk and opportunities, progress will be easier for customers, regulators and potential investors to track. A proactive approach should involve ongoing engagement and discussion with key stakeholders to gain consensus on short-term actions and longer-term strategies. Getting management buy-in as early as possible will ensure fintechs chart the correct course.

The fintech sector now has the opportunity to harness technology, creative ingenuity, and treasure troves of data to tackle sustainability obstacles and create a healthier planet. Not only can we ensure continued profitability, but we can also do so in a way that meets consumers’ growing needs for more climate-conscious action, and ensure that fintech paves the way for a more sustainable world.