Headlines about catastrophic wildfires and storms worsened by climate change can make people feel anxious or unsure about what they can do to help.
Some banks and fintechs hope their mobile apps will provide some guidance. Features that calculate a user's carbon footprint based on their spending, recommend ways to live a more sustainable life and nudge them toward offsetting their environmental impact through vetted or certified carbon-offset projects, are picking up steam in
In the U.S., banks have grappled with measuring and
However, "The consumer side is not front and center for them," said Ariana-Michele Moore, an advisor in retail banking and payments at Aite-Novarica Group.
There are a growing number of climate fintechs in the U.S. that address consumers' needs. Aspiration, one of the first challenger banks to focus on the environment, has
The $369 billion directed toward climate preparedness in the Inflation Reduction Act is expected to reverberate through the economy for years to come and could supercharge private investment in the nation's clean energy sector.
Building effective tools
There are data points that make some of these climate tools more useful than others. Transparency and localized data are two of the key elements, according to Moore.
Ecolytiq helps financial institutions offer green features on their apps such as carbon footprint calculations, personalized insights (for instance, cutting back on red meat consumption) and the ability to donate to projects that are certified by the offset standards organization, Gold Standard. It uses country-specific data from governments, research institutions and non-governmental organizations to calculate a user's carbon footprint, and draws from the Open Sustainability Registry, a publicly accessible source for sustainability information. To assess the impact of a customer's spending behavior when it's not possible to know exactly what they purchased — say, a steak or a salad at a restaurant — Ecolytiq will incorporate information it has gathered from quizzing users about their habits, such as what their daily diet looks like. The Berlin company has also published its methodology in a public
These tools "help imprint in people's minds that they have a connection to the environment," said Max Honzik, the public relations and content manager at Ecolytiq.
Ecolytiq is hoping to ramp up its presence in the North American banking market. Its bank customers in Europe include Rabobank in the Netherlands, the German neobank Tomorrow and Green-Got, a French neobank.
"When we tell people that their deposits go to clean energy, it's hard for people to understand what that means," said Nicole Burford, marketing director of the $31.4 million-asset credit union. To build the calculator, the credit union drew from a study it commissioned from Climate Action Reserve, an offset registry, in 2018 to calculate the carbon offset based on each of its loan types. It calculated the equivalencies using data from the Department of Energy's website.
"We have enough fear and negativity about climate change, so we wanted to shine a positive light on what we can do if we worked together and put money in places where we can help others afford clean energy," said Burford.
The next step is a calculator that does the flipside: estimating how many pounds of carbon customers are racking up with their purchases. Clean Energy is working with Carbon Zero Financial for that project.
Cathryn Peirce, co-founder and CEO of Carbon Zero Financial, also believes that a positive approach is best. "We're opposed to the doom and gloom of, 'Look at what you've done,' " she said. "That's not how you get people to change behaviors." Carbon Zero has a proprietary algorithm it uses to calculate the carbon footprint of a financial institution user's spending. Peirce originally intended for Carbon Zero to launch its own credit card, but pivoted to a business-to-business model a few months ago. She expects to have about 10 financial institution partners in place by September.
Banking green
Like Clean Energy, some challenger banks make the case that simply moving your deposits to a company that facilitates green lending will do good.
Ando and Atmos Financial, which both debuted in early 2021, are challenger banks with similar models: route deposits from their customers to fund clean-energy loans made by community banks. Ando is not currently taking new customers.
For now, Atmos is focusing on utility-scale solar loans. To reel customers in, Atmos offers a checking account that returns up to 5% cash back for shopping at dozens of sustainable companies. Its savings account yields 1.5% for users who make recurring donations to one of the climate nonprofits on Atmos's platform. The company says it has thousands of customers so far. The deposits are held by the the $777 million-asset Evolve Bank & Trust in West Memphis, Arkansas.
"One of the most impactful things people can do behind voting and political activism for climate-aggressive candidates is moving their money from a fossil-fuel funding bank to a climate-positive entity," said Ravi Mikkelsen, co-founder of Atmos Financial.
It's important to note, however, that all of these tools have data and coverage gaps. "The carbon footprint calculators are so high-level, in part because they can't get at your payment data," Moore of Aite-Novarica said. "At a grocery store you have no idea what I'm buying. At Macy's you see the merchant, but you don't get the granular detail about purchases."
Still, she says the time for banks to prepare is now.
"Banks should absolutely be educating themselves on this and start thinking about how they can respond to the industry," Moore said. "Banks want to stay on top of the game even if solutions aren't quite where they need to be."
Peirce likens the utility to her Fitbit. "I have no idea if I actually took that number of steps," she said. "I do know that it helps me be conscious of my behaviors and benchmark progress."
