How Fintech Can Still Help the Planet

Despite ESG losing favour, sustainability schemes offer real world change, and payment tech can play a role too

Disclaimer: views expressed here are my own and do not represent any other organisation

I first wrote about sustainability in payments back in 2023.

As I return to the topic, it’s worth exploring the recent backlash against ESG, and how voluntary schemes such as 1% for the Planet and B Corp are growing in importance.

Fintech by default makes business more sustainable, think of neobanks that don’t need branches, or taking payments on an iPhone rather than a card machine.

Meanwhile Stripe offers users the ability to divert a percentage of sales to Stripe Climate as an easy way for users to do a little something to help the planet.

ESG soared, then flopped

2021 was the year of peak ESG. That year, a record $649 billion flowed into ESG-related investment funds. Larry Fink, the CEO of Blackrock, an Asset Manager, declared that “climate risk is investment risk”, and regulators made ESG disclosures a priority.

But the tide soon turned. 2022 saw net inflows of just $157.3 billion, down 75% from the prior year. 2023 and 2024 saw net outflows, particularly in the US. ESG wasn’t the pull that it once was. The trend for sustainable investment had stuttered.

How much E-waste is in this picture? Photo by Tom Fisk from Pexels - Source

Before ESG, there was Corporate Social Responsibility (CSR), a much looser concept. Think of companies giving the staff a day off to do charity work, or having a bake sale to collect money for those less fortunate. CSD was about companies giving back to society and not measured by financial metrics.

ESG was something different. Initially, something specific to the investment world, Environmental, Social, and Governance (ESG), became a useful framework for analysing companies more widely than traditional financial metrics, and it gave investors a broader lens through which to assess risk.

Examples of how the categories are applied in the original framework include:

• Climate risk exposure - focused initially on things such as how weather events could disrupt company operations. Over time, this evolved to include companies’ plans to reduce their own carbon emissions. (Environmental)

• Supply chain risks - labour conditions in distant markets where oversight is difficult can lead to significant reputational damage. One example that exemplifies this was the Rana Plaza disaster in Dhaka, Bangladesh, in 2013. (Social)

  • The factory roof collapsed, killing 1,134 workers, in a tragedy which was a wake-up call for the fast-fashion industry.

  • Since the disaster, retailers, such as Primark, have put major efforts into improving conditions on the ground.

  • Primark released an update 10 years after the tragedy detailing their work to support the victims’ families.

• Executive compensation - ensuring management pay structures incentivise long-term performance, align with company goals, and maintain board independence. (Governance)

Originally, these factors were set up by investment analysts to examine material financial risks outside of standard corporate metrics. But over time, ESG evolved. It expanded to become a catch-all term for a wide variety of social causes, values, and political issues. Companies are moving away from the term ESG, and there has been a clear backlash, especially in the US.

Things quickly changed

The above example of climate risk exposure is a case in point. Climate risk went from a risk assessed in the supply chain, such as the risk of extreme weather events, to how a company could reduce its own carbon footprint. Many advocates would say these are inherently linked (carbon emissions do affect weather patterns), but the emphasis had fundamentally shifted. ESG went from being an investment risk analysis tool to a broader set of norms, standards and expectations that corporations were held to.

Despite the ESG backlash, sustainable funds still represent 6.8% of total Assets Under Management (AUM) - source

Now the mood is different. Firms are moving away from using the term ESG. Chuka Umunna, JP Morgan’s head of ESG for EMEA, despite his job title, has said that:

There’s been a move towards using the term sustainability in the US over ESG just because it has become quite a politically loaded phrase. Whereas in Europe, I think the two terms are used interchangeably.

In today’s political environment, sustainability feels less politically charged than ESG.

DEI (Diversity, Equity, and Inclusion) became one of the most politically charged aspects of ESG. Even companies long seen as progressive regarding ESG issues, such as Google, have pulled back on hiring targets designed to increase representation from minority and unrepresented groups. Similar retreats are happening across Silicon Valley.

The backlash has even reached the courts. A Texas-led lawsuit alleges that major investment firms used ESG goals to engage in anticompetitive practices. From the Federal Trade Commission’s (FTC) filing:

The case, led by Texas Attorney General Ken Paxton, alleges that BlackRock, State Street, and Vanguard engaged in an anticompetitive conspiracy to drive down coal production as part of an industry-wide “Net Zero” initiative to further anti-coal Environmental, Social, and Governance (ESG) goals. BlackRock, State Street, and Vanguard allegedly exercised their influence as shareholders in competing coal companies to push them to reduce industrywide coal output. The multistate lawsuit alleges that these actions, along with the unlawful sharing of competitively sensitive information and other allegations, increased coal prices and forced American consumers to pay more for energy as part of an unlawful left-wing ideological scheme.

Despite the backlash, trillions in assets remain in ESG-related funds (now increasingly called sustainable funds). At the end of 2024, sustainable funds represented 6.8% of total Assets Under Management (AUM). Even amid changing political winds, there’s still significant interest, especially from European investors, where mandates to invest in sustainability-focused companies remain strong.

From ESG to Payments

Back in May 2023, prior to the ESG backlash kicking off, I took a look at how payments can help save the planet, noting some of the payment technologies making payments more sustainable. In the post, I noted how technology such as SoftPOS and QR code payments could lessen the environmental footprint for businesses. On the consumer side, technology, such as the growing use of virtual cards, can help consumers reduce their carbon footprint.

You may be thinking, how does using a virtual card help the environment?

Well, it’s been estimated that a standard plastic bank card has the following environmental impact:

• 60g CO2 coming from card body material

• 50g coming from manufacturing.

• 40g coming from other areas such as transport and packaging

The total 150g CO2eq (carbon dioxide equivalent) equates to the environmental impact of five plastic carrier bags. Therefore, by using a virtual card and never requesting a physical card, consumers can reduce their carbon footprint.

Some fintechs, such as Revolut, provide a virtual card by default, and asking for a physical card is the user’s choice. Apple Card in the US was virtual card first. UK credit card start-up Yonder allows paid users to request a physical card, but free users need to pay for one. With Apple Pay so common these days, the need for a physical card is diminishing, although a debit card is still needed to get cash from an ATM.

Wise’s eco card - source

For those who want a physical debit card with eco credentials, Wise has the best option. Wise offers a biodegradable debit card, which is available upon request in-app. Monzo and Triodos Bank offer cards made from recycled PVC, which is the next best thing on the market right now. This trend towards sustainable cards is likely to continue. Card manufacturers are offering new innovative solutions, and users are more likely than ever to pay a bit extra to get a card which has sustainable credentials.