On the surface, financial businesses seem so distant from the fight against climate change, but there’s a stronger connection between the two than people might think. Financial businesses, especially fintech, have a critical role to play in creating a low-carbon economy. They can also contribute to achieving the United Nation’s Sustainable Development Goals, particularly goals seven and 13 — affordable clean energy and climate action.
Continued digital transformation
Digitalization is among the top priorities of businesses in recent years, given the benefits that come with it. Establishing a digital presence allows businesses to reach wider audiences, expedite processes, and learn more about consumers through modern data tools. In a nutshell, digital transformation makes businesses significantly more efficient. It’s this efficiency boost that makes digitalization a top green initiative for every business.
Financial businesses should continue their digital transformation if they seek to contribute to cutting down carbon emissions. The more they become digitalized, the less they would need to rely on less efficient practices such as the use of paper. Increased operational efficiency allows financial businesses to downsize as they can achieve the same level of productivity with a smaller workforce.
Businesses that have successfully digitalized their operations are capable of operating outside traditional workspaces. Long-term or permanent remote work becomes a feasible option for employees, leading to potential environmental benefits. It can lead to less travel, less energy consumption, and less waste production. These benefits are not guaranteed, but employers can make sure remote work is sustainable by educating employees and incentivizing sustainable practices.
Shifting to renewable energy
Like every other business, financial businesses that want to go green should use renewable energy. The price of solar and wind energy has dropped significantly in the past decade, making clean energy more affordable than ever. However, renewable energy still has a steep initial installation cost that makes it a big financial decision. This is why it’s important to explore all options before making a commitment.
- Wind energy – the best for those who have acres of building-free land.
- Solar Photovoltaic panels – easy to install and ideally positioned on the side of buildings.
- Solar thermal energy – uses radiant energy from the sun to heat water and generate electricity.
- Biomass systems – burns or ferments organic material to generate electricity.
- Anaerobic digestion – burns methane produced from organic material to generate heat and electricity.
- Geothermal – harnesses heat contained in the ground to provide heating or cooling.
- Hydroelectric – generates electricity through water flow. Dependent on the site but is very reliable.
Waste reduction
The production of waste is an indicator of operational inefficiency. By implementing measures to minimize waste or completely eliminate it, financial businesses can reduce operational costs while also cutting their carbon footprint. There are many types of waste but energy, water, and plastic are the most relevant to finance businesses.
Wastewater can be greatly reduced by using water-free solutions in office restrooms while energy can be saved by using low-energy devices in the office space. Plastic, on the other hand, is trickier to deal with.
The adverse effects of plastic on the environment have been known for a long time, and it’s critical financial businesses don’t keep contributing to the problem. They can reduce their consumption of single-use plastics by purchasing goods that use less packaging or partnering with suppliers that use biodegradable packaging.
Climate fintech
One of the biggest challenges in decarbonization is funding. Almost every green initiative leads to lower costs and more revenue in the long run, but they require hefty payment upfront. Being experts on money, financial businesses can help governments and organizations fund their projects through various financial product innovations.
Fintech businesses can invest more in carbon offsetting, carbon accounting, climate risk management, and ESG reporting as part of their green initiatives. These finance processes are directly tied to emissions reduction projects and their further development means they will become more reliable. For instance, better ESG reporting will encourage companies to follow sustainable business practices.
Purchasing carbon offsets
The purchase of carbon offsets is the controversial practice of investing in green projects elsewhere to cancel out one’s carbon emissions. Financial businesses belong to the group of businesses that don’t emit a lot of carbon relative to other industries. This makes it harder for them to produce significant emissions reductions without resorting to non-feasible measures.
By purchasing carbon offsets, financial businesses can help minimize carbon emissions around the world without compromising themselves. However, they need to ensure the offset projects they’re investing in are either VGS or VCS certified. Projects with these certifications have passed a rigorous set of rules and requirements, ensuring they do what they ought to do and contribute to the UN’s SDG.
Another thing to keep in mind is that purchasing carbon offsets should only be done once an organization has exhausted all viable decarbonization options. In short, it’s the last resort. It’s a way for businesses to ensure they’ve done everything they can to help in reducing carbon emissions.
Conclusion
Financial businesses aren’t so different from other businesses. They produce waste, they consume energy, and they suffer from inefficiencies. By addressing these problems, they are already pulling their weight in the fight against climate change. They can also indirectly contribute through sustainable financial initiatives. What separates financial businesses is their relationship with money, which makes them a key player in funding global decarbonization efforts.
(Bash Sarmiento is a writer and an educator from Manila. He writes in the education, lifestyle, and health realms. His academic background and extensive experience in teaching, textbook evaluation, business management, and travelling are translated into his works. )
