The most recent IPCC (Intergovernmental Panel on Climate Change) report has brought our climate emergency into the centre stage. Whilst a lot of the extreme weather events that were reported on were predicted in previous reports, the real shock for anyone reading it is that it is happening even faster and harder than the climate models foresaw. This report no longer feels like it’s just a warning about a future event. Climate change is happening right now, and we can see it in the 2021 floods in Germany, China and Australia; wildfires in Canada and Greece and record heat in Moscow.
There are already mass mortalities amongst trees and corals, and we are exceeding the many plants and animals’ tolerance thresholds for heatwaves, droughts and floods. While it is difficult to calculate and predict the health impacts on humans, a study has found that extreme temperatures cause over 5,000,000 deaths worldwide and this is only going to increase with the intensification of extreme weather events.
What makes this report such a shocking one, is that it might be the last time an IPCC report is published and we still have time to make the necessary changes. While it is clear from the report that we won’t be able to reverse every effect and that we will still see changes to our environment if we limit warming to 1.5º it is now about limiting those effects as much as possible.
The report makes clear that we need resilience and transformation built into our societies if we are going to stay under our 1.5º threshold. This transformation needs to be global, cross-sector and robust if we are going to keep ourselves away from the worst-case scenario.
In the IPCC Mitigation – Finance Chapter it is acknowledged that there is a market for ‘sustainable finance products’ and that this market has been growing. However, there is simply not enough being done and there is still too much investment being misallocated to fossil fuel-related funds.
The path forward is in taking the ESG (environmental, social and governance) principles we already have in place but scaling them up to tackle the scale of the problem we are facing. The principles of what we need to do stay the same; we still need robust disclosure and labelling, transparency and global investments that help less developed countries to build people and planet into their businesses and societies early on, rather than trying to retrofit.
There is already a market for green finance, with many fintech organisations making their green credentials a central part of what they do. Challenger banks are already challenging the status quo so it makes sense that they would also challenge our approach to measuring our carbon footprint using data to create better ways to tackle climate change. Just by the process of being paperless, mobile and using shared data centres, online banks are already doing good for the environment. However, 52% of traditional banks see climate change as an emerging issue and many are joining fintech in the fight to save our planet – for example, Mastercard now has a carbon calculator tool, designed in collaboration with Swedish fintech Doconomy.
However, the fintech industry is by no means squeaky clean – investment into fossil fuel heavy programs, the large amount of e-waste from regularly updating a company’s tech and the excessive energy usage of cryptocurrency mining are just a few key areas specific to fintech which need to be addressed.
This report is a wake-up call – to us as individuals and to every sector – because this crisis will only be mitigated if we all work cooperatively to make these changes. Whilst it is every sector’s duty to act, fintech is in a unique position of being a fairly new domain that can write the guidebook on the future of the industry and also have the influence to make huge, innovative changes. Fintech also has the opportunity to lead traditional financial institutions to act.
Whilst this IPCC report isn’t a huge surprise, and a lot of the advice stays the same, we must understand the urgency of the findings. There is no time left to wait, to put off action for a few more years. Those of us in a position of influence and power must act, and we must act now.