Climate fintech: Good progress in S-E Asia, but time to double efforts

THE growing number of climate fintech companies around the world in recent years has helped enable and accelerate the global financial sector towards a more sustainable future.

Climate fintech refers to the coming together of climate, finance, and digital technology.

Singapore, in particular, has made impressive strides here - and our hope is that other Asian markets will be able to follow in its footsteps.

Growth potential

The climate fintech sector - which includes everything from green digital payments and investments to digital ESG data analytics and green regtech (the use of information technology to enhance regulatory processes) - has much potential.

It is also constantly evolving, with discussions continuing to take place between industry stakeholders and authorities on how best to manage a range of sustainability related issues.

Still, despite fintechs accounting for more than 50 per cent of all start-ups globally, climate fintechs remain a relatively small subset of start-ups, representing less than 8 per cent of the industry. In Asia, the figure is smaller still, and the sector is in its infancy compared to other developed economies, particularly Europe, which has led the way in sustainable finance adoption in recent years.

Asia has a thriving fintech ecosystem, however, and many others have followed where the region has led. In many instances, the region already has the infrastructure to leapfrog other economies and adopt climate-focused fintech solutions almost immediately.

The region is also ideally suited to support climate fintechs, as many firms – particularly in the B2C (business-to-consumer) space – already have the technology to integrate new strategies. This is the beauty of fintech: it can help make sustainability goals more accessible to individuals and contribute to wider adoption of sustainability at a faster pace.

We believe there is a lot of untapped market potential in the climate fintech space and, given the small numbers in the region, it is the smaller firms that have a new, unique opportunity to make a significant impact.

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Singapore leads

Singapore’s government and its regulators have recognised the importance of sustainability earlier than most. But, while the country’s fintech ecosystem is evolving, it still lags other highly active fintech markets in sustainability - and that’s why its authorities have made it one of their top priorities.

The launch of the Monetary Authority of Singapore’s (MAS) Project Greenprint in 2020, for example, uses technology for efficient and trusted data flows to support green finance.

Government organisations are also forming smaller sub-committees to focus on sustainability and driving sustainable initiatives forward. And, the MAS Financial Sector Technology and Innovation Digital Acceleration Grant scheme is available for some qualifying fintechs.

In the climate fintech space specifically, Singapore recently launched the Point Carbon Zero Programme – a joint venture between MAS and Google Cloud – to drive innovation, incubation and scaling of climate fintech solutions in Asia.

And, in November, the Singapore Fintech Festival will have a whole section dedicated to sustainable finance.

We are already seeing some of the benefits of a greater focus on climate fintech, with the emergence of innovative companies such as carbon credit marketplace Climate Impact X, blockchain ESG registry Stacs, and impact investing platform GreenArc.

Next steps

We hope and expect that other Asian countries will follow in Singapore’s footsteps, which would allow the region to become a leader in the climate fintech space and enable the widespread adoption of sustainability goals.

But, significant ongoing support for the sustainability focused fintech space will be needed to help it develop and become more established.

First, we must continue fostering and encouraging more mentoring, programming and networking across the region. Through greater collaboration, start-ups can explore more possibilities in the space and develop regional solutions.

Second, we must ensure the climate agenda features more prominently in the minds of governments and regulators. While awareness of sustainability issues has grown considerably in recent years, many of the world’s problems are long-term and require a similar long-term approach.

A growing phenomenon across the region is that institutions fear greenwashing allegations. To overcome this, more clarity is needed in the form of set guidance by regulators and standard bodies. This closer collaboration between governments and regulators and technology firms will help to encourage great innovation and accelerate the adoption of sustainability in all aspects of daily life.

F10’s mission is to create ‘the future of finance’ and we believe that the fastest route to innovation lies in early collaboration between start-ups, corporates, and investors; one of the most urgent areas of innovation is the transition to a net-zero society, in which the financial industry will play a key role.

Asia may remain some way behind other fintech markets in tackling climate challenges, but we can take heart from the path that impact investing in the region has taken in recent years. As awareness of sustainability issues continues to build in the region, and demand for products and services rises, more climate fintechs are likely to emerge.

The writer is head of F10 Singapore, which is part of global startup incubator and accelerator F10