Despite political change and turmoil, green initiatives continue to grow apace, with $130bn of green bonds issued in 2017 according to Climate Bonds Initiative. The amount of money being pumped into making every industry green-first is astonishing, and heartening. The question now being asked is what is being done in potentially the biggest industry of all – finance?
With the IMF estimating that the finance industry accounts for $11tn of the global economy, or 15% of the total $77tn figure. Financial players are utilizing the likes of subsidies to push money into environmentally friendly energy, construction and more. As for the industry itself, there are a few creative ways that are making finance greener.
Overhauling everyday banking
The foundation of the financial industry is the day-to-day banking and transactions that people do daily. The banks vie for your custom and the right to store your money, this then generates interest, providing the bank with leverage for mortgages and loans. From there the complex network of trading springs up, giving rise to a huge $164.8bn revenue and $17tn asset mix, according to Government statistics. How do the banks become greener? As always, technology has led the way in pushing environmentalism to the forefront. Digital technology has allowed banks to utilize entirely digital systems, reducing paper waste. Using less cash reduces electricity usage in ATMs. Further on, the banks can offer green products, such as preferable rates on green car ownership, as a hook for consumers to utilize their eco-friendly products.
Reconfiguring the culture
According to analysts, including the UK minister John Glen, the issue with green finance is in the name – it should just be finance. Key to restructuring the way people think is changing the culture around eco-friendly banking. This is being tackled by many institutions and is reflected in their technology.
The most pervasive example of green-driven fintech is the adoption of blockchain. Synonymous with cryptocurrency and Bitcoin, blockchain is a foundation for completely digital currencies that hit hte mainstream when Taiwan announced a digital token tied to their currency. Several large banks in the US, including JP Morgan, have also explored cryptocurrency. This shift will help to change the entire culture around green finance – the only energy required to power a digital currency is that powering the computers. As batteries become more advanced, their energy demands will lessen, making it more feasible for renewable energy to entirely power our financial industry. This will see paper done away with, no necessity for large vaults and banks, and an overall net reduction in energy costs and subsequent emissions.
Between blockchain and the everyday products offered to customers, fintech is helping to reshape the financial sector. As the years go on, it’s likely we’ll see more and more smart/digital integration with banking services. Hopefully, in the future, this will mean seamless and efficient transactions without any compromise on security, and the planet being all round better off.
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