Governments urged to offer incentive schemes to develop green FinTech

Public support plays an important role in facilitating green FinTech development, according to a study on green FinTech in five APEC economies.

A working paper, titled “Exploring the Green Fintech Ecosystem in Asia: Insights from Five Economies in APEC”, says industry experts from five APEC economies, namely Hong Kong, Indonesia, South Korea, Singapore and Thailand, urge policymakers to establish a favorable environment for green FinTech to flourish. According to them, governments can help by offering incentive schemes for startups to develop in this area and spearhead the change by setting sustainable regulatory frameworks and imposing disclosures, reporting and thresholds.

The article is published by GoImpact, an ESG and sustainability education firm in association with The Chinese University of Hong Kong’s (CUHK) Business School.

The Green FinTech study also suggests that financial institutions are embracing the sustainability agenda to achieve the triple bottom line: profit, people and the planet. It emphasizes that given the current competitive banking environment and the global shortage of green talent, financial institutions should leverage their unique positions in the business ecosystem to develop more internal sustainability talent to advance the sustainability agenda.

The study examined policies, markets and opportunities regarding the role of FinTech in driving green finance in the five selected APEC economies through desk surveys, interviews, as well as focus group discussions involving green FinTech startups, governments and quasi-governmental organizations, green FinTech-related associations and financial institutions , and found that both Hong Kong and Singapore are in the stage of scaling up and accelerating to mature levels in terms of green FinTech development compared to the past two years.

Other key findings from the study include:

• Green FinTech startups in Asia have already delivered many different types of green FinTech, such as green digital payments, green digital investment solutions, green digital analytics, green crowdfunding, green risk analytics, green digital lending, green digital asset solutions and green RegTech.

• ESG disclosure regulations play an important role in promoting the green FinTech ecosystem. Supporting evidence comes from case examples in Hong Kong SAR which suggest green reporting startups grew at a faster pace since the ESG reporting requirement for all listed companies came into force in 2020.

• As the green FinTech ecosystem evolves, collaboration and partnership will become more mainstream. There are already several successful collaborations in Asia, including Project Genesis in Hong Kong, Climate Impact X and Project Greenprint in Singapore, and a carbon offset program by Gojek and Jejak.in in Indonesia.

• Financial institutions have already provided several green FinTech services, including biodiversity-controlled stock indices, tokenized carbon credit trading platforms, robotic platforms for ESG investments, green certificates and ESG credit rating systems.

• Sustainability-related education is essential to building a mature green FinTech ecosystem. It will raise awareness, push demand for green finance, and cultivate the talent needed for green FinTech development in Asia.

The four-pronged approach required to build a well-functioning green FinTech ecosystem is: increase demand for green services; increase the supply of green services; mobilize resources; and strengthen the policy.