Sustainable Finance aka Green Finance refers to financial services or decisions that prioritise environmental, social and governance (ESG) criteria or factors when it comes to investment in the financial sector. These factors include things like climate change, energy efficiency, human rights, labour standards and corporate governance.
Sustainable finance aims to promote long-term sustainability and economic growth by encouraging companies to adopt sustainable practices and reduce their environmental impact.
Over the past 10 years the shift towards this trend has been exponential – and that is not an understatement! In 2012 the green finance market was valued at $5.2 billion. It is now a whopping $540.6 billion, and there is no sign of it slowing down!
Since COP26, finance has been at the forefront of the fight against climate change. The world-wide financial services sector has a vital role to play in achieving net-zero targets, and helping companies globally to achieve the same. For many businesses, the transition will mean fundamentally changing their operations, and to do this they will need financing.
The majority of stakeholders (from shareholders to employees, to customers, to communities and regulators) now expect companies to play a role in decarbonising the global economy and are work towards the global transition to net-zero by 2050. Companies who don’t make this a priority will lose out.
Moreover, investors no longer face having to make a choice between profit and saving the planet – both ambitions can align. As investors broaden their definition of Return on Investment (ROI), more startups will look to prove more than just their revenue trajectories. But regardless, the evidence shows that companies who do prioritise ESG factors actually offer better returns for investors. In fact, according to Larry Fink in this article, the global decarbonisation journey is going to be one of the greatest opportunities of our lifetime!
With all this in mind, there is no surprise that we are seeing a wave of startups with products and solutions that contribute to sustainable financing initiatives. This includes the following 5 startups:-
- CarbonChain – A British startup that has developed a platform that enables companies to track, report and reduce their supply chain emissions, covering the most carbon-intensive industries (metal and mining, agriculture and farming).
- Treecard – A company that strives to reduce plastic and to reforest the Earth. Their cards are made from recycled plastic bottles and sustainable sourced cherry wood. Also, 80% of its profits are paid to projects to plant trees, deal with the damage done by the palm oil industry and fight malnutrition in areas of Africa.
- Tred – A UK based fintech that can track your carbon footprint as you go around your daily activities e.g. getting coffee, filling up your car with petrol or paying for memberships. By making you more aware of your CO2 emissions, you can see the possible ways you can reduce your impact and offset it through a number of hand-picked projects that remove or prevent carbon emissions.
- Trine – A Swedish start up that is on a mission to make the world better by making it easier for people to invest in innovative businesses which are having a positive impact in emerging markets.
- Pinwheel – A UK scale-up that is working to secure the future of the planet by making it simple for people “to fund high-quality projects that protect and restore the Earth, whether that’s providing solar cookers to refugees in Chad or saving the British hedgehog from the brink of extinction.”
The rise of these startups illustrate the growing trend of sustainable financing initiatives. As the world continues to grapple with the effects of climate change, sustainable finance will play a critical role in ensuring a more sustainable future for generations to come.