Green fintech is a new trend that investors cannot ignore

Back in 2019, Goldman Sachs made waves after it became the first mainstream Wall Street bank to abandon fossil fuel investments. GS said it would stop funding every new oil exploration or drilling in the Arctic or financing new power plants around the world. Goldman also pledged to invest $ 750 billion in areas focused on climate change over the next decade.

Predictably, other banks began to feel the ethical pressures and a number of other investment banks followed suit.

In April 2020, City group joined GS in denouncing funding for coal mines until 2030 while Deutsche Bank, Germany’s largest lender, vowed to cut their ties with banks that will continue to finance the coal industry through 2025. BlackRock Inc, the world’s largest asset manager with $ 9.5 trillion (AUM) of assets under management, is committed to growing its green portfolio more than 10-fold over the next decade from $ 90 billion to over $ 1 trillion.

But it’s not just mainstream investment banks that have doubled their sales $ 30 trillion ESG market- Recently there has been an explosion of fintech – both new and established players – going green.

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Few are perhaps as noticeable as aspiration, a California-based online bank sponsored by Hollywood actor Leonardo DiCaprio of Titanic fame and acting as the Wells Fargo Alternative, and whose proud mantra is “Clean rich is the new dirty kingdom.”

Aspiration promises to use the leftover change from customers’ purchases and use it to plant millions of trees around the world.

Green fintech

Aspiration was founded in 2015 and has done quite well, growing its customer base to more than 5 million. Designed as the antithesis of Wells Fargo, Aspiration encourages customers to switch their loyalty to a bank that can save them money and a lender they can trust.

Of course, more than some of Wells Fargo’s 70 million customers have tried to get off the ship, including after the bank’s disastrous track record Opening millions of fake customer accounts and Mortgage violations– More than 200,000 Aspiration customers can be traced back to the older bank.

As the founder and CEO of Aspiration, Andrei Cherny said CNN Businessthe growing popularity of the new bank is based on the widespread dissatisfaction of customers with the business models of traditional banks, while more modern banks with transparent models are attracting the younger generation in particular:

“Wells Fargo has gone over the top of what is legal, but many banks sneak into that limit on a daily basis selling products that customers may not need or want. People of all ages – and young people in particular – are fed up with “big” banks. There is this massive distrust of financial institutions. “

Cherny pointed out how banks make big bucks through hidden fees that range from monthly service fees to overdraft fees and ATM fees. Aspiration’s fee philosophy is radical yet quite effective – it offers a superlative service that many customers simply feel obliged to pay: “It’s up to us to do such a great job that they pay us when they don’t have to. The vast majority decided to pay. “

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So what other ways does Aspiration make money on its customer deposits?

After all, few, if any, nonprofits that do not follow the freemium model can long survive and provide services for free. Aspiration says that instead of charging fees, it makes most of its money from dispersing around interbank and interest rates, or the fees retailers pay banks when their buyers pay with a card.

Another key difference: Aspiration offers fossil fuel-free accounts and firearms, distancing itself from Wells Fargo, which has been criticized for funding controversial oil pipelines.

Aspiration says it can justify the “green” coat as it has planted 35 million trees in the last 12 months alone. CEO and co-founder Andrei Cherny claims his company now “plants as many trees every day as it does in Central Park.”

The company is also promoting its mutual fund, which it says is “fossil fuel free”.

Corresponding Lexology, the term “fintech” describes in general technologies that aim to improve and automate the provision and use of financial services for customers. However, the term “green fintech” is relatively new and typically describes companies or initiatives that have a positive impact on the environment, e.g. lower greenhouse gas emissions or more biodiversity.

The “Green Fintech” ecosystem comprises fintech companies that are actively helping to shape this fundamental shift towards sustainability from planting trees to offering investment options without fossil fuels.

However, aspiration is hardly the only fintech that can claim the green coat.

In August, Ant forest, a tree-planting mini-program in Alipay app which enables users to earn virtual points for low-carbon lifestyles, and announced that since its launch in 2016 it has helped more than 600 million users plant more than 326 million trees, encouraging reforestation efforts in some of the driest regions China’s contribution.

Finovate lists 25 fintech companies they have turned green.

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