2016 was the hottest year on Earth since records began in 1880. For those of us who work in financial inclusion but are fearful about our lack of progress in combating climate change, the following is a spot of good news: at the recent World Economic Forum Annual Meeting in Davos, Ant Financial and the United Nations Environment Program launched the Green Digital Finance Alliance.
The Green Digital Finance Alliance is a global partnership bringing together digital finance businesses and stakeholders to accelerate fintech innovations that address global environmental challenges. The initiative will focus on sparking innovation, collaborative action, and increased public awareness to ensure that the fintech-powered global financial system of the future is aligned with environmentally sustainable development.
The Alliance’s core members will be financial institutions committed to using digital technology to advance green finance in lending, investment, and insurance. The Alliance will also engage a diversity of allies from across the environmental and financial spheres. The Alliance aims to provide a bridge that enables parallel industries to work together.
A number of times we’ve written about the potential for inclusive finance to support environmentally sustainable development. Base-of-the-pyramid financing models can support the purchasing of clean lighting and energy, as well as sustainable agricultural inputs and tools. Agriculture insurance providers are incentivizing climate change adaptation and risk mitigation behaviors. Extending beyond traditional brick-and-mortar financing approaches, fintech-enabled services create new possibilities for similar efforts.
For example, M-KOPA provides solar home systems in Kenya, Tanzania, and Uganda that use machine-to-machine technology (M2M) to enable customers to pay as they use energy – a micro-payment solution. The systems use embedded technology that monitors and meters their usage. An initial deposit is made, and customers then pay daily installments via a mobile money service until their balance is paid off. Once their balance is paid off, the customer owns the system outright. This pay-as-you-go system replaces the need for a loan to finance the large purchase of equipment.
Ant Financial, an affiliate company of Alibaba, has over 450 million users of its online and mobile financial services in China. Ant provides an app that offers users a carbon account alongside their savings and credit accounts. The platform employs algorithms that harness users’ financial transaction histories to generate carbon footprints. Good carbon footprints in turn earn users green energy credits. The app integrates social media as well as a complementary, tree-planting carbon offset program. To date 72 million Ant users are participating in the carbon program.
For more on the Green Digital Finance Alliance, click here.
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