The state of the climate fintech ecosystem 🏦🌲
Plus milk, mylk and more milch
Greetings all,
Crazy week. It seems like Biden will be the next president, which is a huge relief if you care about the environment. I’m betting you do if you’re reading this 😊
This week I decided to review the climate fintech landscape. I’ve seen several new companies focusing on this area and talked to some investors who are starting to get smart on the space. I map out the general sub-verticals and notable players through the framework of the traditional fintech ecosystem.
In place of my own research on an actionable sustainability topic for you and me, check out this cool post about milk alternatives. The only addition I would add to Green Lizard’s analysis is that some milk alternatives have junk ingredients *cough* Oatly *cough*. In my opinion, it’s best to avoid processed oils, preservatives, and other unnecessary ingredients. Instead, look for options with fewer ingredients — many brands have as few as two ingredients!
~~Brendan
The state of the climate fintech ecosystem 🏦🌲
In the wake of Stripe’s climate announcement last week, I thought it would be worthwhile to assess the current state of the climate fintech ecosystem. Some of the companies I cover below are obviously fintech companies, and others aren’t. The ones that are questionably fintech companies are universally carbon offset or removal businesses. In some sense, carbon markets are a subset of traditional financial markets, and thus the software built around those markets often resembles fintech companies. With this disclaimer in mind, I include companies that fit one or more of the following criteria:
Proximity to existing financial services infrastructure (esp. digital point of sale or software near the payments flow)
Technology shifting capital to environmentally-friendly investments
Climate-centric takes on existing fintech products (digital banking)
The Landscape
Before we take a look at the landscape, I must caveat that this is by no means meant to be exhaustive. This is an evolving space, so think of this as a first draft:
Digital Point-of-Sale Carbon Offsets & Removals — These companies facilitate carbon offset and/or removal purchases for ecommerce transactions or at digital point-of-sale. As a refresher, a carbon offset is simply a credit bought to negate an action or purchase's emissions impact. Some interesting players in the space:
Stripe Climate — Enables businesses using Stripe’s core payments processing products to direct a percentage of revenue to carbon removal projects. Carbon removal is an important component of the decarbonization transition as it enables more permanent carbon sequestration and addresses the need to remove previously emitted greenhouse gases. With several hundred billion dollars of payments volume flowing through its pipes each year, Stripe will rapidly develop the carbon removal market's demand side. Stripe is also considering rolling out a consumer-facing product to allow individuals to opt-in to removals at checkout. One of the early Stripe Climate customers is actually Substack, the software I’m using to write this newsletter.
EcoCart — Offers a Chrome extension that automatically purchases carbon offsets for ecommerce transactions at no expense to the consumer. The company earns a commission when users shop at any of its 10,000+ brand partners, which EcoCart uses to buy carbon offsets for its customers. There’s no reason not to install this today – it’s completely free and doesn’t sell your data.
Neutral — Similar to EcoCart, but 100% focused on Amazon. Neutral is a Chrome extension that computes the carbon impact of your Amazon purchases and makes it easy for you to buy carbon offsets. They also offer free alternatives on how to neutralize your CO2 impact, like “skip meat for 8 days.”
Digital Banking — Much like digital banking giants N26 and Chime, these companies offer various financial services products but center the environment when it comes to rewards, investing vehicles, lending guidelines, etc. Some of the notable players:
Aspiration — Offers the most complete suite of services, including a savings account, debit card, sustainable investing vehicles, and a retirement account. Pays out more rewards when customers shop at sustainable brands and allows them to opt into round-up carbon offset purchases (e.g., spend $5.55 and $0.45 is automatically directed to buy an offset).
Carbon Zero — Although pre-product at the moment, Carbon Zero is building a credit card that automatically neutralizes your carbon footprint based on your transaction data.
Doconomy — This is one of the few European companies I’ve included, but that’s mostly because U.S. financial institutions are using its Aland Index (more on this later). The company is also launching a set of earth-centric credit cards in the near-term as well.
TreeCard — Provides a wooden debit card that plants a tree for every $60 you spend. TreeCard does this by directing 80% of its interchange fee to Ecosia tree planting projects. I must say the wooden design is quite pleasing.
Emissions APIs — Emissions APIs provide the infrastructure for businesses to negate their carbon footprint programmatically. Except for the Aland Index, these companies are not vertically focused on financial services. But, because there is such a large opportunity to support financial institutions with their emissions mitigation transition, they are worth including in this analysis. Though there are many exciting digital banking startups, I suspect big retail banks like Chase and Bank of America will leverage these APIs to offer sustainable banking products to their customers. A brief overview of some of these businesses:
Aland Index Solutions (Doconomy) — As I mentioned earlier, Aland Index Solutions is a product within Doconomy’s suite. It is used by financial institutions to perform CO2 emissions calculations for payments and transactions. SF-based Bank of the West’s 1% for the Planet debit card uses this API for its emissions math and offsetting.
Cloverly — Offers a carbon offsetting API for a wide range of use cases, including supply chain, ridesharing, and energy. Its fintech integration enables analysis of transaction data to turn into actionable emissions mitigation and sustainability tracking.
Nori — A big name in the climate world, Nori is a supply-side carbon removal platform. They also run an amazing podcast. Differentiating themselves from some of their competitors, Nori develops carbon removal projects by working with U.S. farms to implement regenerative agriculture practices. They sell carbon credits created from these projects to businesses and individuals, including via API. Nori’s also doing interesting work in carbon markets broadly, which I discuss below.
Patch — A platform for negative emissions. Patch offers an API that calculates emissions for businesses and enables them to purchase carbon removal credits. Some use cases of its technology include carbon-neutral ecommerce (similar to the digital PoS companies above), banking & payments, logistics, and travel.
Wealth & Investment Management — Though none of these companies are exclusively climate-related, centering the environment is a core use case for all of them. This class of software shifts investor dollars away from the least sustainable businesses to greener pastures. Some interesting startups include:
OpenInvest — Enables wealth management advisors to build, manage, and report on ESG-focused portfolios. OpenInvest allows users to optimize their portfolios for greenhouse gas emission reductions, fossil fuel divestment, defunding pipelines on indigenous land, and fighting deforestation.
Tumelo — Large employee investment accounts (like pensions) often offer little transparency and optionality for its investors, especially ESG considerations. Tumelo is trying to change this by giving investors transparency into their holdings and say in the investment process. On the investment platform and provider side, Tumelo delivers insights on how to better satisfy their investor base and offers tools to expand assets under management.
Wealthsimple — A fairly established retail robo-advisor platform, Wealthsimple offers robust, socially responsible investing options, such as an ETF that eliminates the top 25% carbon emitters in each industry.
Blockchain for Carbon Markets — If you haven’t figured it out yet, carbon markets provide organizations that sequester greenhouse gases a way to make money. They also allow carbon emitters, both businesses and individuals alike, to purchase carbon credits to theoretically offset or negate the impact of their carbon footprint. A massive problem in carbon markets is the double-counting of credits, meaning multiple parties are claiming the same emissions reduction. This is where Nori comes in:
Nori – I discussed Nori’s business model earlier in this post but did not mention their blockchain solution for carbon credit management. Nori packages sequestered carbon in digital tokens called Nori Carbon Removal Tonnes (NRTs), which can be bought and sold through its online marketplace. By creating a blockchain-based carbon marketplace, Nori hopes to solve the issue of double-counting and bring transparency to removal markets.
Renewables Financing — With renewable energy sources now significantly cheaper than legacy energy sources, the country is on the cusp of a rapid transition to clean energy. An important component of this transition is readily available and affordable sources of capital for green infrastructure. Raise Green is one such business enabling this future:
Raise Green — A crowdfunding platform for community renewables projects. Gives investors, both accredited and non-accredited, access to direct investment in renewables projects with measurable community impact. On the project origination side, Raise Green provides software to streamline the process of creating local renewable projects and executing a securities offering. I covered this company in my last newsletter if you want to dig deeper into the business.
Closing Thoughts
I plan to update this landscape as the industry evolves, so if you’re a startup who thinks they’ve been wrongly excluded (or included, for that matter lol), please get in touch. I would love to hear from other stakeholders in the industry as well 💚
Thanks for reading 🙏 If you have any feedback or want me to research a particular topic, please leave a comment below or send me a note. Also, if you’re not a subscriber yet, you know what to do 👇