The green economy is gaining a lot of attention in Europe and the whole world. Green energy and investments in sustainable initiatives are growing because of the climate crisis and the geopolitical challenges we face nowadays.
According to the European Commission, the green economy could grow the alliance's GDP by 1% and bring net savings for EU businesses of up to EUR 600 billion by 2030. However, even with the Green Deal, even the most progressive European countries face challenges implementing green initiatives and rising investments in the sector. The opportunities and challenges of the green economy were discussed in Fireside chat: How Fintech Can Help Implement a Green Economy? during the Fintech Day 2022 event.
"The fintech sector, which combines the latest technology and finance, can be the first to innovate processes and technology for so much needed sustainable development in the finance industry. Today, Fintech companies can become a link between society and green finance, further strengthening this growing ecosystem, ”says L. Žemaitytė-Kirkman.
The steps towards the green economy
Fintech is a sector that connects the newest technologies and finances. Fintech companies are the first ones to bring innovation and embrace modern changes. In this day and age, fintechs could become that link between society and finance that brings sustainability. Moreover, the government has the decision-making power to empower the green economy and encourage consumers and businesses to act towards a more sustainable future.
According to Marius Jurgilas, Board Member at the Bank of Lithuania, the green economy is growing, and the traditional economy is changing. He listed four ways how this is happening:
Changing consumer needs. People are more conscious of what they buy and where their money goes. Businesses react and embrace more sustainable solutions, products, and services following consumer preferences.
Behavioral changes in businesses. More companies implement sustainable initiatives and goals in their daily procedures.
Government's involvement in the decision-making process. Governments are nudging their people to embrace more sustainable production and consumption methods. Even if, at that moment, the decision doesn't match consumer preferences, it works for the greater good.
The way we produce and consume energy is changing. People want more renewable sources, the Western world also has the challenge to become more independent from fossil fuels and dirty energy from the East.
Dominykas Stankevičius, an Investment Associate at Launchpad Capital, added other important points from the fintech's perspective. Fintechs have access to a large database. It provides a better understanding of what consumers seek and what they are interested in and could be used to encourage consumers to make more conscious decisions. “Imagine your bank or any other payment company saw that you made a transfer to, for example, UNICEF or to support Amazon forests. So, what they can do with this data is to nudge you to buy more green products,” explained Mr. Stankevičius.
Collaboration between the regulator and fintechs
The way to the green economy is still filled with many obstacles and challenges. To ease this transition, both governments and fintechs could help each other out.
Marius Jurgilas believes that the government can enable fintechs. He thinks that the government should work on opening consumer data in a responsible and safe way for the better good. Data could help implement more sustainable projects and encourage people to evaluate their decisions better. "Society is saying, "we don't want to live in a place where there's no life after 50 years". Then the government acknowledges that and tries to find a solution," said Mr. Jurgilas.
But for the government to find the best way to reach people it needs tools. Fintechs are the ones that can help bridge governments with people through technology. Advanced technological solutions improve customer experience, build trust, and provide security. "What's important for the fintechs is to bring awareness about modern technologies, to talk with the government, and to talk it through to identify the risks and opportunities that these technologies bring. Also, going to associations and building a community to communicate together with the government is crucial," Mr. Stankevičius explained how fintechs could help the government.
Challenges for the green economy
The green economy could bring many benefits to businesses and everyday people. However, we are still moving slowly towards it, and spokespeople named a few limitations that are hindering the process.
Communication and knowledge exchange channels between governments and fintechs are still limited.
Consumer initiatives to push businesses. Individual choices are a great start, but they don't make much change. More people have to push businesses and governments to become more sustainable, invest in green energy, and other initiatives for the change to happen.
Business initiative. Consumer behavior is changing, but so should businesses'. Saying you are sustainable isn't enough, there has to be more business involvement in both initiatives and lobbying to promote green projects and investments.
Although the change is slow, both fintechs and regulators agree that the green economy will dominate in the near future. With the climate crisis, geopolitical turmoil, and everyone's well-being being at stake, we should expect many more positive developments.