Climate Fintech: Handprints vs Footprints

A global push

The 2015 Paris Agreement was a watershed moment in the fight against climate change.  It was the first time a legally binding climate change agreement was agreed, signed and adopted by nearly 200 states and countries.  The main objective of the agreement is a long-term temperature goal to keep the average rise below 2 degrees from pre-industrial levels.  It also aims to reduce emissions as soon as possible and reach net-zero in the latter part of the 21st Century.  This agreement kick-started both technological innovation as well as shifts within the financial services industry to meet these ambitious goals, such as a commitment of $100bn per year to the Green Climate Fund, providing much needed capital to finance climate projects.  Concurrently with the Paris Agreement, the UN created 17 Sustainable Development Goals of which climate is an important theme.  Specifically, Goal 7, which is to ensure access to affordable, reliable, sustainable and modern energy for all,  Goal 12 which focuses on ensuring sustainable consumption and production patterns and Goal 13 which is to take urgent action to combat climate change and its impacts.  Also coming out of the Paris Agreement was the UN’s Race to Zero campaign, designed to mobilise both businesses and cities in the “real economy” to achieve net zero emissions by 2050.  One of the ways that these goals are being met is through the Green Digital Finance Alliance, a non-profit focused on redeploying capital on a global scale to reshape the financial system and align it to sustainable development.

These are just a few of the topdown initiatives that are supporting the shift towards sustainability across the world but there are certain geographies where it is a higher priority than others.  Leading the pack is the EU, who aims to be the world leader in climate policy action through ambitious legislation such as The European Green Deal, by focusing on providing green choices.  Additionally the Sustainable Finance Disclosure Regulation (SFDR) provides a legal framework of transparency for investment funds by making disclosures more comparable and easy to understand.  These top-down political initiatives are driving the creation of startups at the intersection of climate tech and fintech within Europe.  Europe currently accounts for half of global ESG assets which is providing the financial capital to implement these policies.  Europe also recently announced the “Fit for 55” package, an overhaul of legislation to encourage green options which will help achieve its mission by 2030 of reducing emissions by 55% from 1990 levels, a key part of The European Green Deal. Europe is the only one of the top polluters to go beyond committing to achieve net zero emissions to enacting legislation.

This action in Europe is in contrast to the minimal political action and investor indifference to climate action in the US.  A PGIM survey found that only 47% of North American investors are actively incorporating climate change into investment processes compared to 80% in Europe.  However, the momentum in the US has picked up recently with $174bn in the recent American Jobs Plan being allocated towards the electric vehicle market as well as an executive order by President Biden requiring companies to disclose financial risks related to climate change, giving regulators a push to start assessing the risk climate change can have on financial markets.

Whilst the pandemic has switched priorities for many businesses to pure survival, as economy’s are starting to open up, climate action still remains firmly on the agenda.  25% of the EU’s €750bn COVID Recovery Fund has been dedicated to climate action and countries like South Korea are pursuing a Green New Deal with a carbon tax and an end to coal investments.  Consumers are also keeping climate action top of mind as the above survey data from BCG shows.

Although this piece is not designed to be an in-depth review of the political policies or scientific evidence of climate change, a brief background was necessary to provide context to the topdown pressures that have created a huge opportunity at the intersection of climate tech and fintech.

Handprint vs Footprint

Alongside different geographic priorities, individual actors within the climate tech ecosystem deploy different actions that have informed and shaped the climate fintech startups they support.  Daniel Goleman speaks about this difference as “Carbon Handprint v Carbon Footprint”, which is a useful dimension through which to explain this discrepancy.  

Carbon footprint calculates the level of emissions of one’s activities whilst a carbon handprint focuses on how much emission reduction one can make by taking positive actions and influencing other actors.  Carbon footprint is rooted in measuring and avoiding negative actions while carbon handprint focuses on taking positive actions.  For a specific product, the carbon handprint is the difference in carbon footprint between itself and a baseline product, as measured in equivalent CO2 metrics.  Chasing “net zero” is a great example of how businesses focus on carbon footprint i.e. reducing their negative impacting activities  In contrast, carbon handprint solutions focus on lower carbon footprint projects or on helping others reduce their carbon footprint.  Nesté is one example of a company that focuses on its carbon handprint by helping its customers decrease their carbon footprint.

Another salient example of the carbon footprint approach taken by institutions is the negative screening approach used in ESG investing which excludes certain companies or sectors from receiving investment due to the negative impacts of their businesses.  As we will discuss later, this can have some consequences that are not exactly what were designed.  Furthermore, companies and businesses strive to become “net zero” but why stop there?  Why not have a net positive impact on the environment?  While avoiding or stopping negative climate behaviour is a good step, consumers want to go further than just cutting polluters out and want to have a positive impact and they focus on their carbon handprint.  This difference in focus really can make an impact and shape the types of climate fintechs that receive funding.  

In this report we follow the money and take an in-depth look at companies and startups innovating in this space.  We will dive deeper into the handprint vs footprint approach and make some suggestions as to how institutions can go beyond thinking about their footprint and focus on carbon handprints.

What are the drivers?

An increasing concern about climate change and its impact on business performance is the main driver behind the ESG movement.  These three non-financial factors, Environmental, Social and Governance, are mostly being used by institutional investors, but increasingly by consumers, to evaluate businesses and brands to broadly measure sustainability and societal impact.  Investors are clearly voting with their dollars by dramatically increasing their allocation to ESG investment strategies. Bloomberg reports that investors who use ESG in their evaluation will pledge $53trn by 2025 to this new style of investing, representing over a third of total assets under management (AUM).

This piece isn’t about a deep dive on ESG specifically, but given its role in the climate space and its rapid growth, it's worth taking a look.  The typical considerations for ESG are; 

  • Environmental - climate change and sustainability

  • Social - diversity, human and animal rights, consumer protections

  • Governance - corporate management, compensation, equality

Consumers are also driving this trend with their purchasing decisions and decisions around where they work.  The above survey from PWC is only the tip of the iceberg and this trend in data is behind many of the consumer fintechs that are operating at the intersection of climate and fintech.  The ongoing COVID-19 pandemic has accelerated a behavioural shift in consumers with 50% of those surveyed stating they had become “more eco-friendly” since the pandemic started. 

It is easy to see why consumer and investor concerns matter to businesses. A study by the World Economic Forum found that, on average, 25% of a company’s value is based on its brand and reputation.  According to a study by ESG Clarity, 60% of consumers don’t realise they can invest in a way that contributes to climate change efforts and 52% of consumers contributing to a pension in the UK didn't recognise that the financial services industry can make a difference.  This is an important gap that climate fintechs are helping to close.

Climate Fintech Funding

The best way to see what the future for the climate fintech sector is, is to follow the money.  The climate fintech space can be hard to define given the expansive reach of both sectors separately, but broadly looking at companies operating within the climate tech or clean tech verticals as well as the fintech sector seems like a good place to start.  The data below shows the rapid acceleration of the space over the past 5 years, with 2021 like the fintech sector as a whole, seeing a rapid inflow of investment.  Climate fintechs have raised over $1bn to date in 2021 across nearly 70 deals and 60 companies.

Looking at these funding rounds provides some insights into key subsectors of growth;

  • Data

  • Offsetting

  • Banking

  • Financing and Investing

  • Blockchain

Data Providers 1.0

Every industry needs data and the climate and ESG space is no different.  It is often the first space to develop because without access to data to quantify the impact of ESG, consumers, businesses and investors are shooting in the dark.  This explains why it is the category with the most number of startups. The need to reliably measure the impact of business activities on the environment is the first necessary step for individuals, companies and countries to meet the ambitious climate goals that they have signed up to.  Data around energy usage, resource waste (e.g. water) and carbon emissions is far easier to track now more than ever.  Whilst data provides the first fundamental building block for the space, these companies are not fintechs per se, but often serve fintechs and financial services companies and are therefore an important foundational layer in the space. 

The lack of globally accepted climate data standards is one area of concern as it makes comparisons between geographies difficult; but this hasn’t stopped data providers being one of the largest areas of investment in the climate fintech space.  Within the data space, given how early we are in the industry, data providers focus on calculating carbon footprints and none were found that have a carbon handprint lens such as helping businesses or consumers help others reduce their footprint or giving the consumer information they could act on to switch to a lower carbon footprint solution but this should develop over time.

There are broadly three different areas that data providers focus on.  Firstly there are those that focus on corporate sustainability by helping businesses track their own carbon footprints and that of their supply chains.  One such company in the space is Ecovadis, a provider of business sustainability ratings to allow businesses to report on the sustainability of its supply chain to investors, which is used by the likes of ING and AXA. Other companies include German based Planetly, which provides a full end to end carbon management solution for businesses to identify, measure, reduce and offset their carbon footprint and share commitment and progress to stakeholders.  Companies like Planetly that provide end-to-end solutions cross over a few climate fintech categories, but for ease we are bucketing them in the data category.

A second area that data providers focus on is tracking the impact of investments.  Here the primary focus is around the ESG rating system, a framework institutional investors employ to evaluate the strengths of possible investments.  This is big business as companies such as Refinitiv, MSCI, Bloomberg and S&P Global, traditional data sources for the investment industry, have gotten into the game of providing ESG data on companies.  These same companies have also created indices which investors can benchmark their investments against or invest in.  ESG data provider TruValue for example was acquired last year by FactSet for an undisclosed amount, showing the maturity of the ESG space that is increasingly being dominated by large incumbent financial data providers.   

However, the inherent problem with ESG data is the “carbon footprint” mentality and focus on avoiding negative actions.  An excellent example from an article in Stanford Social Innovation Review explains that MSCI gives Exxon and BP an ESG score of “BBB'' because its pollutive behaviours are being well managed and not threatening to the company’s financial value. In essence, because Exxon and BP both manage their carbon footprint well, they have the resources to do so, they perform well according to ESG scores, which some would argue shouldn’t be the case given the damage their oil and drilling businesses do to the environment. Other research also found that investors who signed the UN Principles for Responsible Investment did not improve the social and environmental performance of their investments.  An article from HBR proposes transparent, standardised auditing of ESG commitments but the lack of standardisation, as mentioned earlier, is a key issue with ESG data globally and reporting more broadly.

Alongside these traditional investor data providers, newer ones are springing up. Net Purpose and Matter provide ESG data for investments, allowing investors to track, report and measure the impact of their portfolio companies and other investments.  Tumelo provides insights for retail investors who want to better understand where their pension is invested and has partnerships with companies such as Penfold, Cuson, Seccl, Wealthyhood, L&G and Aviva to do so.  Impact-Cubed is another ESG investment platform providing sustainability data and portfolio analysis.

The last area in which data providers are focused is on measuring the impact of spending and is more focused on the consumer market.  Yayzy, Greenly and Doconomy all connect spending to environmental impact so consumers can get transparency to how their behaviours are impacting climate change.  These companies are utilising Open Banking regulation to access consumer transaction data and turn purchase information into impact information.  One of the key data providers is the Aland Index, a CO2 emission calculation for payments and financial transactions which is a partnership between Alandsbanken and Doconomy and currently powers Klarna’s CO2 insights that it provides to customers.   ClimateChain is a rewards based platform that tracks spending and rewards consumers for shopping with companies having a positive impact.  This positive incentive structure is a strategy to get consumers to focus on responsible consumption, mirroring the incentive structures in the large credit card rewards industry.  Credit card companies have been very successful in encouraging spending on their cards with the reward of earning air miles, the antithesis of what we are focused on with this report, but an example that nonetheless demonstrates the potential success for rewarding climate friendly consumption.  I would like to see American Express or Chase offer a climate card that swapped out airmiles and travel rewards for some carbon offsetting, tree planting or other positive climate rewards.

Data Providers 2.0 - Call to action

As mentioned at the outset of this segment, there is a clear gap in the market to focus not only on carbon footprint but on carbon handprint now that the climate data space is more developed.  Carbon footprint numbers in isolation are not very useful.  The above is a screenshot from Nordea’s banking app which shows the customer’s carbon footprint for the month of October using Aland Index.  Whilst somewhat useful, it lacks context.  How does 44kg compare to other users? What is normal?  What is good?  We need to go one step further and use the handprint lens and offer some actionable insights and lower carbon footprint alternatives to behaviour and consumption.  Danish company Matter, an ESG data provider, provides the amount of green energy produced by portfolio companies but other than that, we haven't found much in the way of carbon handprint data solutions. Additionally, we need to find ways to allow consumers to encourage their  friends and family to take additional positive steps, possibly by combining consumer ESG scores with social media to provide social status. 

If you are working in this space, please reach out.

Carbon Offsetting

For companies that are unable to go net zero or have not yet managed to reorient their businesses, there is a thriving market to trade carbon credits that can be tapped into once companies have calculated their carbon footprint using the aforementioned data providers. Patch provides carbon-offsetting-as-a-service (COaaS) with a few lines of code,  think Stripe but for carbon offsetting.  They recently raised nearly $21m at a $123m valuation from heavyweights a16z and Coatue, demonstrating the climate fintech space is getting more mainstream.  Klima in Germany is doing similar things and is backed by HV Capital, 468 Capital and Reber Capital at a more modest $59m valuation.  There is also ClimateSeed out of Paris. Watershed, backed by Sequoia, takes a more holistic approach by providing end-to-end carbon footprint measurement and reduction planning as well as the Watershed Marketplace where companies can fund carbon removal, clean power and carbon offset projects.  Combining data, action and offsetting into one solution makes it easier for businesses to take action and will likely be a successful model for others.  Sylvera is tackling the problem of transparency within the carbon offset space to monitor projects to ensure they achieve the goals that investors want.

The carbon offsetting market is slowly taking off but is nowhere near large enough to accommodate the needs of businesses and consumers.  The voluntary carbon offset market is measured at $300m globally according to Ecosystem Marketplace, but this pales in comparison to the demand from consumers.   A study of consumers in Britain found 61% were willing to pay to reduce future increases in climate change-related deaths with a mean amount nearly £20 per month.  An earlier study from the US found on average a willingness to pay between $79 and $89 annually to reduce greenhouse gas emissions.  If we extrapolate these numbers, the demand for offsetting needs to grow rapidly by ~100x to meet stated demand.

Banking Services

Whilst there has been a big push for companies to make changes to help meet ambitious global climate goals, there are a range of more practical options for consumers to make changes in their day to day lives.  These climate fintechs provide easy options for consumers to live a more sustainable and climate conscious lifestyle, sometimes providing the full suite of consumer financial services including banking, savings and investments.  Cushon focuses on net-zero pensions with over £740m invested through the employers that they partner with.  Aspiration, a sustainable challenger bank, is the big giant in this space having raised over $450m and valued at $2.3bn with illustrious investors including Flourish Ventures, Omidyar Network, Leonardo DiCaprio, Orlando Bloom and others. Tred provides a debit card that tracks spending and carbon footprint and provides an embedded solution to offset the impact of spending. Notably Starling, Nationwide and over 60 others have launched recycled cards as both Mastercard and Visa are shifting to sustainable plastics as well.  Meniga is a digital banking platform provider that allows existing digital banks to integrate carbon insights into their app to provide end users with the transparency they want.  COnsumers not only have more sustainable banking solutions readily available, but also have an increasing willingness to pay to mitigate climate change as the previously mentioned studies found.  We are still yet to see mainstream traditional banks take the climate leap like Nordea  in the Nordics have.

It is within this banking space that there is the most potential for a carbon handprint focus given it is the heart of consumers' financial lives.  But banks are currently only focusing on their own footprint and activities, not how they can help customers improve their own footprint, which would be a more impactful handprint approach.  There has been little development to build transparency around climate friendly places to spend and invest.  Meniga could be a great platform to help digital banks provide recommendations to consumers as to alternative places to shop to decrease their carbon footprint, based on their transaction history. 

Research from Cornerstone Advisors and Meniga outlines the significant opportunity with the above data highlighting a key issue for the demographics banks and fintechs are trying to target which could be the hook they need for customer acquisition. An example of such an actionable insight might be that upon seeing that the consumer shows at Zara, a fast fashion retailer, the consumer could be nudged towards shopping at retailers who have signed up to Fashion Revolution’s manifesto or to use clothing rental solutions like Wear the Walk.  Providing lower carbon footprint alternatives combined with green rewards and offsetting would be a powerful solution for making an impact.  The more social focused banking apps could provide a way for users to share their carbon footprints and handprints amongst their friends to enhance their status and encourage others to act, expanding their handprints.  It appears the retail market is ready for this change as research from Kearney on attitudes towards retail banking in Europe showed that nearly 50% of consumers said ESG issues are important when choosing their banking provider and 24% are likely to switch if their bank is not engaged in ESG issues. 

Financing and Investing

To meet the ambitious goals we discussed earlier, money needs to be invested and there is no shortage of startups and fintechs looking to help finance sustainable projects or match investors looking for sustainable initiatives with people and companies that need funding.  There are a lot of options to finance energy home efficiency measures such as solar panels and home improvements with Dividend Finance, Sungage Financial or platforms to invest in clean energy, sustainability and renewables like CoPower, Wunder Capital, Clim8, Yova and Abundance Investment. Open Invest provides ESG investing solutions coupled with tax optimisation for investors and was recently scooped up by JP Morgan this summer.

There are also places where energy can be traded between clean energy producers and consumers.  Electrify’s Synergy solution is a P2P platform to allow owners of solar panels to receive revenue from their excess energy.  Germany’s Enmacc provides a trading platform for professional energy traders, akin to a Bloomberg terminal, for more sophisticated traders.  ErovaEnergy is a similar enterprise out of Ireland.  SparkChange is another firm which provides a platform for both institutional and individual investors to buy, sell and manage carbon security investments, allowing the investing directly into carbon emissions and providing liquidity into the carbon market.

Although the option for climate and ESG investments are clearly available, recent data showed that only 17% of millennials are participating (the highest amongst any generation) despite 64% of millennials saying that ESG issues are important to their investing decisions.  Why the gap?  There is an observed phenomenon known as the “value-action gap” whereby what people say their values are doesn't correlate with their actions which could be part of the problem.  But it could also be that the right tools do not exist yet or are not widely accessible.  The same Cornerstone research shows that only 9% of consumers who consider climate change to be the most important challenge actually tracked their carbon footprint, mostly because they don’t know how.  Research by The Wisdom Council and some investment managers found 6 in 10 retail investors didn't realise they can invest sustainably and with 90%-95% of investors sticking with the default fund, could also help explain the gap. 

Closing the “value-action gap” by providing tools to allow consumers to easily switch to climate positive investments or track their own carbon footprint will be critical to achieving the lofty global climate goals.  This is exactly the trend that new consumer fintech Gaia is trying to tap into as well as the previously mentioned concern retail customers have of their bank being engaged in ESG issues.  Coupled with the digital acceleration caused by COVID and the near zero interest rate environment, it is a ripe time to start a consumer fintech.   

Gaia recently launched the first iteration of their product, an investing app to help people invest in companies whose values align with their own, into a closed beta.  Having seen most investing apps designed for finance and tech bro’s, Gaia has designed their app differently to cater to first time investors who are highly conscious about sustainability issues.  They have seen a lot of interest from female investors already and even though many studies have found that women outperform men in the investing discipline, only 1 out of 20 hedge funds employ a female portfolio manager. And just 26% of American women invest in the stock market which is why Gaia is excited about the opportunity to help close the financial gender gap. The Gaia app gives consumers access to an impact report to show how they are making a difference and will add social features to facilitate interaction between users around new investment opportunities and the sustainability efforts of their portfolio companies.  This is designed to increase a user's carbon handprint and not just their footprint, which was one of Gaia’s key learnings in the difference between retail investors and institutional investors.  Furthermore, after their hundreds of customer interviews, they learned that almost all of the popular ESG ETFs failed to live up to customer expectations. It was especially when it came to the underlying companies in the ETFs that people voiced their skepticism, something also highlighted earlier in the report as an issue with ESG scores.

Investing is only the first step for Gaia.  They are on a mission to help everyone save, spend and invest for a sustainable future.  They want to help their community consume more sustainably and reward them for making sustainable choices, for instance offering impact loans where the interest rate depends on the environmental impact of their purchase.  2022 will be a year for wider European expansion, capitalising on network effects in solving sustainability issues.

Gaia was recently accepted into the Mastercard Lighthouse MASSIV program that is designed to support fintechs that are making a social impact.  Also taking part in the Mastercard Lighthouse MASSIV program is Investure, a Swedish company that runs a funding platform for impact investing to help connect financiers with investment opportunities in developing markets. 


The power of blockchain technology has the potential not just to power web3 and the metaverse, but for those concerned with the physical world it is also creating an impact.  The environmental impact of the crypto ecosystem and crypto mining is widely debated but not the focus for this section of the report.  The Blockchain & Climate Institute is a think tank dedicated to supporting the use of blockchain in tackling climate change.  Nori is a carbon removal marketplace powered by blockchain and its native NORI token can be exchanged for one Nori Carbon Removal tonne.  WePower is a blockchain-based green energy trading platform with its WPR token used as a payment mechanism.  According to a profile in Wired, it links energy consumption and production data to the blockchain to help bring the energy sector onchain and has a deal with Elering, one of Estonia’s utilities.  Topl’s blockchain was built to track impact, providing a source of truth for claims of sustainability and enables a certification system to make its data actionable through its impact monetisation engine. The World Economic Forum provides some additional use cases of green smart contracts to reward good stewards of land for things like improving soil and increasing tree cover.


It is clear that the number of startups at the intersection of climate change and fintech is growing rapidly, as are investor dollars that are looking to have a positive impact.  There is a significant amount of capital focused on both spaces independently and it makes sense that startups having a foot in both sectors are thriving.  We are still in the first innings for this emerging category with data transparency providing a foundation layer for new financial services and carbon offsetting opportunities.  But there is still a chasm to cross from businesses and consumers who say they want to behave more sustainably and them actually doing so.  To extrapolate some of the data we have found to all consumers, there is a huge market for carbon offsetting which would overwhelm current supply with the US alone needing offsets of $100bn+.  The mindset is still that of avoiding negative behaviours rather than encouraging and switching to positive behaviours as we come back to the footprint vs handprint framework.  

There needs to be a focus on education, to bring awareness to consumers that there are ways for them to make an impact if that is what they want.  They can track their carbon footprint, make changes to where they invest and spend to be more sustainable.  As more money flows into this space, fintechs will start to have money for marketing to attract users which will help. Making climate the focus will be a winning strategy for a neobank or incumbent bank, but who will be the first to move?

 There also needs to be a focus on incentivising and rewarding sustainable behaviour.  Funding for cheaper green loans, mortgages and financing for more sustainable home improvements needs to greatly increase to meet demand.  Businesses that want to make changes need to also be incentivised and rewarded for doing so.  A green credit card reward system would go a long way to help consumers alter their behaviour.  As a very recent example, the UK government's £5,000 grant for heat pumps is a great start to reduce reliance on gas boilers but total grant funding will only provide 90,000 pumps, a drop in the ocean to the 25m homes that have gas boilers according to the BBC.  It always comes down to money.

Lastly, we come back to the data.  Great strides have been made to make tracking and measuring easy but it is still a rudimentary measure.  Two flights that cost the same but one with a duration of two hours and another for five hours would both likely have the same carbon footprint because of the lack of granular data beyond amount spent and merchant category.  Not only that, but the lack of standardisation in measurement makes data hard to compare.  Aspiration created its AIM measure and puts sustainability measures in focus for consumers but suffers from lack of granularity.  Maybe the data that is available currently is good enough for the time being and when the demand and money is there to pull more granular data, data providers will shift their focus.

As investor David Roos wrote and I found through this research, it is moving from transparency and openness to action that is important.  Action is the layer to be built on top of the foundational layer that the data providers are building and, while it is still early, there are a number of great climate fintechs working on helping both businesses and consumers act not just to reach net zero or avoid unsustainable behaviours, but to provide a mechanism to switch to lower carbon footprint options in our daily lives and to encourage others to do so as well.  Consumers should be proud of the behavioural changes they make and find ways to showcase and encourage others to do the same.  Imagine a social media platform where followers and likes are irrelevant but status is achieved through more sustainable actions.  That would be one way to really increase the global carbon handprint.