The big buzz word for 2024 is anthropocene, a term that describes the start of a new geographical period – the age of humans.
This turning point in planetary history marks a recent shift in the makeup of earth’s rock layers, due to the irreversible impact of human activity on the planet’s climate and ecosystems.
Some scientists believe we have entered this anthropocene epoch, others contest it. What is clear to all is that humans have profoundly and negatively altered the earth. The problem of climate change is real and won’t resolve itself.
We need to act now- and we must do it together.
Reversing the effects of environmental damage is hard work. It requires the implementation of swift measures by consumers, governments and businesses alike across industries and borders.
Innovators also need to play a major role in driving climate solutions for a sustainable future.
The call to action is particularly loud for the fintech sector, which develops and maintains the global financial networks that all industries rely on. By leveraging their experience in constructing new and innovative systems for mass adoption, fintechs can provide the critical infrastructure to help companies mitigate their impact on the environment and to hold to account those that do not.
But innovation thrives on cooperation to create forward looking solutions, and a good place to start is at this year’s Davos, the annual World Economic Forum conference taking place this month.
DAVOS, fintechs, and the climate crisis
Gathering the world’s leading policymakers, bankers and economists together in the Swiss Alps, Davos offers a global stage to debate the most pressing problems facing the anthropocene era and to find answers to these challenges.
This year’s conversations should include a discussion on the allocation of funding to environmental infrastructure and sustainability initiatives – with room at the table for fintechs to join the debate.
Significant changes in the Earth’s rock layers and other environmental indicators that are threatening the planet’s existence are levying a social consensus that corporations must act now, in addition to legislative policies. The dawn of a new epoch, driven by human pollution, is expected to place additional emphasis on sustainability financing during Davos this month.
Fintech has emerged as a powerful vehicle for transformation in the race to net zero. The industry’s ability to collect and analyse vast amounts of data is critical in enabling organisations to decrease their emissions. Fintechs are also well-versed in API integration, lowering onboarding hurdles and enabling all digital organisations to participate in the race to net zero. Investors attending Davos are also more likely to fund fintech-native environmental initiatives, owing to a stronger record of monetary returns when compared to standalone sustainability projects.
Sustainable infrastructure: built by fintechs, adopted by all
Fintechs are forging a sustainable corporate landscape, democratising access to ESG data and increasing the transparency of emissions tracking. One such industry leader, Flowcarbon, is helping businesses to mitigate their impact on the environment by leveraging blockchain technology to do away with carbon credit double-counting and dispel greenwashing. These advances are industry-agnostic, empowering all corporations to prioritise their social duty to the environment.
Voluntary carbon markets – potential and opportunity to reverse climate change
Flowcarbon’s business model shines a spotlight on the immense environmental and commercial returns of carbon markets, which in its entirety is worth over USD $900 billion globally.
There are two main segments: compliance markets and voluntary markets. Compliance markets form the bulk of the global carbon market value, and are regulated. Governments set caps on the total amount of greenhouse gases that can be emitted, and companies are required to hold permits equivalent to their emissions. If a company exceeds its cap, it must purchase additional permits or face penalties.
The voluntary carbon market, in contrast, with an estimated value of around $4 billion, is notably smaller, but is shaping up fast. This segment is a critical slice that Flowcarbon is focused on and which other fintechs can target too.
Every credit, representing one metric ton of reduced, avoided, or removed CO2 or equivalent greenhouse gases (GHG), can be utilised by a company or an individual to offset the emission of one ton of CO2 or equivalent gases. Once used, the credit transforms into an offset, transitioning to a registry for retired credits, where it becomes non-negotiable.
Companies can participate in the voluntary carbon market either individually or as part of an industry-wide scheme, such as the Carbon Offsetting and Reduction Scheme for International Aviation, which was set up by the aviation sector to offset its greenhouse gas emissions. International airline operators taking part in CORSIA have pledged to offset all the CO2 emissions they produce above a baseline 2019 level.
Agility in fintech
With so much opportunity in this space the time is now for fintechs to tap into this noteworthy advancement of the sector and to use agile technology to maximise its full potential. In fact, fintechs are well-positioned to transform all financial infrastructure for the better. Pioneers are bringing to market financial technology built from the ground up to minimise harm to the environment, enabling meaningful progress towards net zero without incurring a reduction in performance or efficiency.
However, funding allocations and economic policy decided at Davos and similar gatherings of world leaders hold the key to unlocking this potential.
Decision makers need to take action before it’s too late. Fintech innovators stand to benefit – as pioneers of transparent emissions tracking, mitigation and sustainable core infrastructure, the industry’s startups are leading the charge towards net zero and hold the key to a better future for all.