Green Fintech: who are the B2B players helping businesses and financial institutions to work greener?
As discussed in the first part of this study, traditional financial players participate strongly in global warming. Among the main COP26’s announcements, one actually came from the Glasgow Finance Alliance for Net Zero, which gathers 450 banks, insurers, asset managers, and other financial institutions with more than $130 billion of assets under management. This global coalition is committed to accelerating the decarbonization of the economy and limiting global temperature increase to +1.5°C. It means that these players will lead their investments in green technologies rather than coal, oil, or gas.
If such a statement is already a big step, regulation is very much needed to drive some change. While more and more companies take actions for the environmental cause, setting a regulatory frame prevents them from greenwashing. As a matter of fact, the European Commission put sustainable finance at the top of its priorities and now forces some companies and financial institutions to be transparent on their ESG policy. By being a first-mover when it comes to ESG regulation, Europe has enabled the Green Fintech sector to flourish — and it is only the beginning. In the future, businesses and financial institutions will need solutions that allow them to access and analyze their ESG data to include them in their non-financial reports. These reports will eventually become just as important as financial reporting and will ultimately be submitted to regulators.
Regulation is not the only reason that explains why businesses and financial institutions are willing to work greener. Today, mentalities have evolved and environmental awareness is among all players in society. Drivers for a company to reduce its carbon footprint are diverse: appealing to consumers, attracting potential hires, winning tenders, seducing investors, or even getting better loan terms.
At BlackFin, we mapped B2B green fintechs among 4 categories:
- carbon footprint trackers
- data providers
- reporting tools
- investment and offsetting solutions
Those solutions target 3 types of players: companies, investors, and banks. Yet, such categorization has some limits since some fintechs provide many services. For instance, some reporting tools also collect data or provide offsetting solutions.
What is the market opportunity of those solutions? What challenges are they facing?
Carbon footprint trackers helping companies to measure their environmental footprint or providing white label tools
In the first part of this study, dedicated to B2C green fintech, we already had a category focused on tools to measure carbon footprint. Thanks to Open Banking, those players can access consumers’ banking data to calculate the carbon footprint of their daily purchases. One thing to notice is that all B2B startups mapped here have started with a B2C focus before pivoting towards a B2B or B2B2C model.
Indeed, some of them decided to adopt a B2B approach and now offer their carbon footprint tool to companies instead of individuals — still using transactional data. It is the case of Greenly and Carbo. Such a pivot enables them to build stronger unit economics, with bigger average baskets and a better controlled CAC. Whereas a carbon tracker can be nice to have in the B2C world, it can become a must-have to win tenders or attract the best profiles.
Startups like Doconomy or Ecolytiq chose to embrace a B2B2C model. They now offer their carbon tracker as a white label solution to banks and fintechs. For instance, Doconomy partnered with Standard Chartered’s Singaporian branch to allow its end customers to measure and follow the environmental impact of their purchases.
There are other players specialized in carbon footprint calculation. If we did not include them in our study, it is because they don’t use companies’ banking transaction data to calculate carbon footprint or don’t target specifically financial institutions. Thus, we don’t consider them as fintechs.
Data providers helping businesses and financial institutions to build ESG reports and drive their investment decisions
Some companies use data collection solutions at the point of sale, long before reporting. That is the case of RepRisk, a company founded in 1998 that enables banks to integrate a tool to evaluate ESG risks into their customer onboarding and KYC process.
There are also specific solutions for investors to provide carbon footprint calculations on their overall portfolio or even external companies. Companies like Arabesque, Urgentem or Integrum ESG access external ESG data from public sources by using big data and machine learning. Ultimately, they enable investors to take into account those information during the investment process. This field is starting to be a bit crowded and it can be hard to differentiate the players. Key success factors include the quantity and quality of data but also how automated this data collection is. Some players also specialize in specific ESG data. For instance, Equileap focuses on data related to gender equality whereas Look through only focuses on Real Estate.
Reporting tools allowing financial institutions and businesses to be compliant with evolving regulations
In Europe, ESG regulation is based on 3 pillars: NFRD, SFDR, and taxonomy. Those regulations are likely to evolve. For instance, CSRD will soon replace NFRD: it will target four times as many companies and broaden the scope. Differences between those 3 regulations are related to the type of companies they address, the rules they implement, and their dates of application. All those specificities can be quite confusing for businesses and financial institutions. Therefore, they would rather delegate reporting tasks to experts.
Given reporting differs from one company to another, some fintechs have decided to target a defined segment among businesses and financial institutions. Greenomy, a Belgian fintech launched in 2021, offers 3 different platforms for companies, banks, and investors. On its dedicated platform, every company / bank / investor is guided through the ESG data collection process and the platform automatically calculates the ESG KPIs required for the reporting.
To become a market leader, the data collection process needs to be as automated as possible — however, data are often not available online and spread among internal and external sources. The end goal is to make sure your client will get a valid reporting that will be easily approved by an audit company, as it is when dealing with financial reporting. In addition to data collection, data sharing is also key. Indeed, the market leader will be the one who succeeds in establishing itself as a reference player for all concerned, i.e. companies, investors, banks, but also audit and consulting firms. Ensuring a fluid and harmonized sharing of ESG data is definitely a key success factor.
Investment and offsetting solutions helping companies to reduce their environmental footprint
In order to reduce their environmental footprint, companies, banks, and investors can invest in impactful projects. Yet, offsetting solutions are often associated as greenwashing initiatives.
To solve this issue, Stock C02 tries to make carbon offsetting a local action by enabling companies to invest in local offsetting projects. In Germany, BullFinch matches investors and lenders with clean projects’ owners.
By being early when it comes to regulation, the European Commission participates in building global fintech leaders. Indeed, it already happened with Open Banking! Therefore, we think Europe has a leading role to play in the Green Fintech field — as it combines a deep advantage regarding regulation but also cultural awareness. Yet, we hope putting in place such regulatory changes will be clear and quick.
