The financial industry is caught between two revolutions, digital and climate. How they collide, where they find common ground, and why it matters to each of us.

The climate crisis has existed for decades in the form of graphs at conferences and lines in scientific journals. The digitalization of finance has also unfolded slowly, first contactless payments, then mobile banking, then cryptocurrencies. But now these two processes have collided at one point, and what arises at their intersection is no longer possible to ignore.

We are used to thinking that money is one story and climate is a completely different one. But in fact, these are two sides of the same coin, and fintech is the place where they finally met.

Artem Lyashanov

In this article, I will try to understand what is really happening at the intersection of two revolutions, what specific tools are already changing the market, where the risks are hidden, and most importantly, what this means for an ordinary person who keeps money in the bank and wants their choices to matter.

Two streams that merged into one

Imagine two rivers. The first is the digital revolution in finance (mobile banks, automated investments, cryptocurrencies, crowdfunding platforms). The second is the climate agenda, which forces governments, companies and investors to reckon with environmental risks and look for ways to finance the transition to a clean economy.

Fintech in itself is no longer news. Money transfer applications, robo-advisors that select an investment portfolio, online platforms where businesses find financing bypassing banks, all this has long become part of our everyday life. But when these same technologies begin to be consciously directed towards supporting environmental goals, a qualitatively new phenomenon is born.

Green fintech is not just fintech with a green logo. It is a whole field of solutions where technological innovation and climate responsibility become inseparable.

What is really behind the word green fintech

When it comes to green fintech, most people imagine something vague.

Firstly, these are crowdfunding platforms that allow ordinary people to invest in renewable energy or reforestation (instruments that were previously available only to large institutional investors). Technology acts as an intermediary, connecting those who want to invest in green with a project that needs money.

Secondly, this is the tokenization of carbon credits (one of the most interesting and controversial areas). Imagine a company preserving a forest or restoring a swamp, receiving carbon credits for this, confirmation that it has absorbed a certain amount of CO₂. These credits can now be converted into digital tokens and traded like stocks. Blockchain solves the problem of proving that a specific unit of carbon was actually stored and not sold twice.

In 2019, BBVA issued the world’s first structured green bond on the blockchain. The entire negotiation process took place on the bank’s internal platform.

Third, there are new-generation robo-advisors that take ESG criteria into account when building an investment portfolio. You simply answer a few questions and an algorithm selects stocks of companies that match your environmental and social values. Previously, only a very wealthy client with a private banker could afford such personalization. Now anyone with a smartphone can.

The dark side of green technology

It would be unfair to talk about green fintech only in enthusiastic tones. This phenomenon has serious aspects, and the more it grows, the more acute they become, – notes Artem Lyashanov.

The first and most fundamental is the quality of the data. Any algorithm that assesses the environmental impact of a company or project is only as good as the data it feeds on. And with climate data, they are fragmented, incomparable, often incomplete or outdated.

The second problem is paradoxical, the digital infrastructure itself, on which fintech is based, consumes huge amounts of electricity. Cloud servers that process billions of transactions, artificial intelligence calculations, blockchain networks, all this requires capacity. Data centers already consume about 1-2% of the world’s electricity today, and this share is growing. If this electricity is produced from fossil fuels, then green fintech carries a significant carbon footprint.

Finally, there are purely financial risks, namely the rapid growth of new technological solutions is always accompanied by increased vulnerability to cyberattacks, failures and manipulation. Regulators around the world are trying to keep up with the market, but so far this pursuit resembles shadow hunting.

And what does this mean for us personally

If you have ever wondered where your pension savings or funds on deposit go, then green fintech is directly related to the answer to this question. New digital tools allow the average investor to independently choose whether he finances a coal-fired power plant or a solar farm.

That is why analysts emphasize that in parallel with the development of technology, it is necessary to increase the financial education of the population. A person who does not understand what is behind the inscription ESG-fund in a mobile application cannot make truly conscious decisions, even if technology theoretically gives him such an opportunity.

Green fintech is a real intersection of the two most important transformations of our time, digital and climate. Like any powerful phenomenon, it carries both enormous potential and real risks.

Artem Lyashanov