Green and other FinTech

Green Fintech


The world is struggling to address growing inequality, the impacts of climate change and widespread deterioration in the natural wealth that sustains communities and underpins the global economy. The current turmoil is driven in part inadequate policy responses to these challenges. This imperative may seem distant from the financial system, but nothing is further from the truth. As the UN Environment Inquiry has spelled out in both editions of its global report, “The Financial System We Need”, realizing the Sustainable Development Goals (SDGs) and climate commitments agreed in 2015 depends in part on a reset of the global financial system to ensure that private capital is redeployed to finance the transition to an inclusive, green economy.

Financial technology (‘fintech’) is emerging as a core disruptor of every aspect of today’s financial system. Fintech covers everything from mobile payment platforms to high-frequency trading (HFT), and from crowdfunding and virtual currencies to blockchain.

In combination, such forceful innovations will threaten the viability of today’s financial sector business models, and indeed the effectiveness of current policies, regulations and norms that have shaped modern finance.

The unit cost of intermediation of the last century has been estimated to about 1.5-2%, leading to suggestions that efficiency savings over time in one area of financial services have been largely offset by additional fees in another area. This has attracted new fintech start-ups and their disruptive business models, and with them significant opportunities and risks.

The use of technology in finance is of course not new – but a step change is now expected with the novel application of a number of technologies in combination, notably involving blockchain, the ‘Internet of things’ (IoT) and artificial intelligence (AI). This novel application of a number of technologies in combination makes the current wave of disruption unlike any we have seen before in finance.
Fintech innovations promise a more efficient, accessible and less vulnerable financial system.
Fintech offers the prospect of accelerating the integration of the financial and real economy, enhancing opportunities for shaping greater decentralization in the transition to sustainable development. Turmoil and transition guarantee that tomorrow’s financial system will be very different from our current understanding and practices. Indeed, the very distinction between finance and the real economy will become blurred as fintech embeds finance at the core of an increasingly automated global economy with seamless two-way communication. Change is clearly desirable given the current shortfalls in providing finance for sustainable development.