Banking on a sustainable future: how financial services innovation is supporting greener lifestyles
Often seen circulating among the environmentally aware on social media is a meme featuring a prophecy from the native American Cree Indians which warns: “When the last tree is cut down, the last fish eaten and the last stream poisoned, you will realise that you cannot eat money.”
It’s a powerful admonishment of society’s excessive resource use, for sure. But what if money could actually help the climate, ecosystems and species recover? Well, a growing band of financial services innovators are attempting to do just that by linking the use of their products to actions benefitting the environment.
From helping individuals better understand the carbon impact of purchases to funding eco restoration, the scope of initiatives is immense and expanding. And both science and public opinion demonstrate the need for such propositions is clear.
For example, the average carbon footprint per person in the UK is 12.7 tons of CO2 per annum against an international average of 7 tons. Yet some experts say this needs to be reduced to around 2 tons a year to stand a chance of keeping warming to 1.5C.
It seems people are responding though, with one global survey finding that 85% of respondents are shifting their purchasing behaviour towards being more sustainable over the past five years.
But who are the financial businesses striving to meet this challenge?
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One company trying to help the environment is Tred, whose mission is to make money work for people and the planet. Soon to launch, Tred is a payment card and app on Mastercard rails and helps users both calculate the impact of the products and services they buy, while offering opportunities to support tree planting.
With Tred, each transaction is categorised and its effect weighed against other lifestyle areas. The app also uses open banking, allowing customers to plug any debit and credit cards they hold with other providers into the platform. This enables people to ensure all their purchases can be scored environmentally, while using a range of their favourite payment products.
Another innovator is Novus, which claims to be the UK’s first B Corp-certified neobank “turning everyday spending into a force for good”. The business shares revenue with 10 global NGOs (non-governmental organisations) to help tackle some of today’s biggest challenges, from poverty and water scarcity to climate change and deforestation.
Like Tred, Novus works with offsetting partners and supports projects including tree planting and renewable power generation. Additionally, Novus has teamed up with more than 130 sustainably-minded brands across clothing, furniture and gifts to offer rewards for purchases using the app.
Who’s taking care of the long-term?
If day-to-day money management helps mitigate immediate harms on the environment, who’s working to take care of the long-term future of the planet? Step forward a range of propositions with ethical investment options.
The Big Exchange, co-founded by street paper and social enterprise The Big Issue, has been set up in part to help people invest and grow their wealth with the aim of making a positive impact. Customers can create their own investment bundle with a mixture of ethical fund managers, or choose a ready-made product.
Tumelo takes a more activist approach. Established to ‘bring investments to life’, its software empowers investors to engage the companies they own on issues they care about. The business, which last year joined an official virtual trade delegation showcasing UK fintech ESG innovation at New York Climate Week, says its approach helps investment firms to connect with customers in order to serve both humans and the planet.
The proposition was set up to tackle the lack of visibility people have over where their money is going. Tumelo’s founders believe society is currently disengaged from an investment system that “is failing to address critical social, environmental and governance challenges”.
And for the really long term there’s PensionBee, the digital platform that enables people to consolidate pensions and set up new products. Amongst its plan offering is a fossil fuel free option that excludes investments in hydrocarbon and tobacco sectors and is aligned with the UN’s Paris climate goals.
How this all ends: where sustainable financial innovation is heading
So, it seems from the here and now to long into the future, financial services technology is enabling individuals to use their money to deliver better eco outcomes. The trend adds to the growing chorus of voices urging the big institutional investors and lenders to plough their funds into renewable technology rather than fossil fuels.
From a marketing perspective, new brands will need to be mindful of the increasingly crowded nature of the marketplace and develop USPs with a laser-like focus. Alongside this consumers are fast wising up to greenwashing – as are regulators like the Advertising Standards Authority and the Competition and Markets Authority.
This means claims about what products and services deliver need to be qualified with accessible data. For descriptions, brands should use ‘greener’ rather than ‘green’ or ‘more environmentally friendly’ rather than ‘environmentally friendly’ to avoid falling foul of marketing watchdogs.
In addition to green propositions, financial businesses of all hues are starting to embrace ESG. Recent research found that 80% of companies were considering hiring an internal position to implement a sustainability drive across their operations in anticipation of future environmental regulations.
Nonetheless, the eco economy is only just getting started and a world of opportunity awaits innovators who demonstrate an ability to fix society’s biggest pain points. And one day it might just mean that the way we spend our money will ensure more trees are being planted than cut down, while rivers and other ecosystems are no longer polluted.
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