In a new report, GoImpact, in collaboration with The Chinese University of Hong Kong Business School and Ant Group, revealed the four main challenges faced by the green fintech industry.
In principle, despite the ongoing ‘funding winter’ faced by global startups, the trajectory of development for green fintech has shown strong momentum, according to the report. However, these four remaining challenges remain:
1. While global reporting frameworks such as the International Sustainability Standards Board (ISSB) have made rapid progress in this area, there remains a lack of agreement on a unifying global standard.
2. Greenwashing as a follow-on consequence in the absence of universally aligned standards and metrics. The report stresses that greenwashing poses a serious threat to the credibility of the entire sector.
3. A lack of interoperability of protocols between different platforms. According to the report, such interoperability is essential for integrating ESG data in green finTech solutions and other ESG offerings.
4. A significant talent gap. A general lack of education and awareness for the sector has resulted in a large talent
shortage for skilled sustainability practitioners, particularly in Asia.
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“Given the complexity of navigating Net-Zero versus economic growth targets and varying levels of ESG adoption among jurisdictions, it is imperative to have more collaborations between the public and private sectors,” the report said.
“This approach aims to balance the current trend of short-term profit-driven economic growth with the long-term needs of sustainable development, emphasising the demand for talent and skill development at the intersectionof green, finance, and technology. Educational and skills-related institutions are crucial in developing learning programmes that will upgrade and develop the relevant talents in the five APEC economies.”
The report also explains in details about the different forms of green fintech that are available in the Asia Pacific market today, and they are grouped into five categories:
1. Climate solutions
2. Carbon management
3. ESG reporting & disclosure tools
4. ESG risk solutions
5. Green insurance
“The benefits of green fintech bear a direct correlation with the rapid traction of Voluntary Carbon Markets (VCMs) in the APEC jurisdictions, aligning with the long-term vision of nations and corporations to combat climate change,” the report said.
“Alternative data sources utilising blockchain and artificial intelligence (AI) can also boost the credibility of ESG reporting that is becoming more regulatory and compliance-driven in nature, as well as well-informed and transparent sustainable investment and financing strategies.”
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When it comes to its role in supporting the adoption of ESG and sustainability principles in the region, the report stresses that green fintech has “significant opportunity” to support SMEs in this journey.
“Less equipped to embrace sustainability initiatives compared to large corporations in terms of resource availability, SMEs can adopt green fintech solutions as an option to get started more efficiently. Likewise, green fintech companies have an opportunity to make SME operations more environmentally friendly, improving their creditworthiness,” it said.
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