As fintech companies expand their services, there are an increasing number of innovative solutions with a green intent on offer. To better grasp these services and avoid greenwashing, a standardized classification system of the green fintech market has been introduced in Switzerland. A move welcomed by the sector. This taxonomy should give clients, investors, and policy makers an easier access to green fintechs.
Fintechs role in society is becoming more vital than ever. Its innovative financial solutions can be used anywhere, by anyone. Various classifications have emerged using categories reflecting those used by the traditional financial sector, such as digital lending, digital payment solutions, digital wealth management. But overtime, the number fintechs with green objections has soared, prompting the need for their own taxonomy.
Switzerland is home to nearly 400 fintechs. Many of these thus classify as green fintechs according to the classification just described. This trend is reflected in the global rankings of the sector. Zurich ranks fourth among Western European financial centers and Geneva seventh in the latest Global Green Finance Index released in April. In the green finance banking sub-index Switzerland ranks first and regarding policy second.
The Green Digital Finance Alliance (GDFA) and the Swiss Green Fintech Network have now unveiled the world’s first standardized classification system of the green fintech market in Switzerland. It ensures global applicability and is intended for use beyond the Swiss borders.
A taxonomy supports the entire sector
The categorization of the green fintech sector not only provides clients, investors, and the companies themselves with definitions for which economic activities can be considered sustainable. It also contributes to protecting clients from potential greenwashing, gives the green fintechs more visibility, and may foster more collaborations and standardization within the sector. “It’s very useful to have a standardized classification at hand for the green fintech industry. It’s good for the visibility, to be able to explain the business to both customers, potential investors, and policy makers,” says the founder of the Swiss digital fundraising provider RaiseNow, Marco Zaugg.
The taxonomy puts forward eight categories of commercial green fintechs.. Green digital payment and account solutions is one of them. Firms in this category, amongst others, automatically calculate the carbon footprint of their customers. Other categories include green digital investment solutions which provide automated, algorithm-driven green financial planning (the Swiss fintech Inyova is a pioneer in this market) and digital ESG-data and analytics solutions, which automatically collect an array of green data.
Swiss green crowdfunding fintech – a European market leader
Another category is green digital crowdfunding and syndication platform, where the Swiss start-up RaiseNow, fits perfectly. Its technology helps non-profit organisations such as charities, membership clubs and foundations to raise funds or get paid for their specific causes. “Fridays for Future, the global climate movement founded by Greta Thunberg, for instance uses our technology to raise donations, so do UNICEF, Greenpeace and Amnesty International,” says Zaugg, who also is the CEO of the company. “We also cover the needs of more than 20 000 smaller clients such as sport clubs and musical associations.”
The company’s market is huge and growing. Last year, individuals around the world donated more than 5 billion US dollars to charities. “The digitization of this growing market is still in the starting blocks,” Zaugg underlines. RaiseNow is active in almost every European market, being the largest Swiss player and the second-largest player on the German market. The Swiss start-up has on its own managed to raised more than half a billion dollar since its foundation back in 2015.
The remaining categories of the classification are
- green digital risk analysis and insurtech (firms offering solutions to minimize climate and nature-related risks),
- green digital deposit and lending solutions (firms granting loans to green projects),
- green digital asset solutions (firms offering cryptocurrencies or utility tokens with green properties),
green RegTech/SupTech, (solutions automatically checking whether financial products and services adhere to green standards or taxonomies).
 Environmental, social and governance