Climate change poses substantial economic and political risk to the global economy. Efforts to mitigate such risk will require a fundamental retooling of our global economy and coordinated action across public and private stakeholders. Financial services institutions play critical roles, however incumbents in banking, insurance and finance are slow to innovate. Their legacy technology infrastructure and business models don’t lend themselves to iteration and innovation.

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Conversely, fintech has shown its ability to drive innovation and to reach venture scale. Financial product innovation and applied technologies such as big data, artificial intelligence, distributed ledger technologies make capital availability, data gathering and processing much faster, transparent and cost effective. As a result, they have important roles as enablers and disruptors within climate change.

The climate transition requires financial sector innovation in multiple areas:

  • Facilitating the shift of investment dollars towards renewable energy and away from oil & gas
  • Tools for tracking emissions and changing behaviour at the business/consumer level
  • Financing of new infrastructure for energy and transport
  • Management and mitigation of climate risks

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The fintech market represents a small percentage of the overall financial services sector, however it is growing rapidly and driving change across the industry. The global fintech market is projected to grow steadily at a compound annual growth rate (CAGR) of about 23% reaching a market size value of $324B by 2026. Climate fintech is set to play a major role within a fast-growing space.