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2023 | Book

Fintech and Sustainability

How Financial Technologies Can Help Address Today’s Environmental and Societal Challenges

Editors: Thomas Walker, Harry J. Turtle, Maher Kooli, Elaheh Nikbakht

Publisher: Springer Nature Switzerland

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About this book

Fintech can improve sustainability, influence policies, and require new regulations. Climate change, water pollution, and non-renewable resources management can all be addressed with fintech innovations. Despite the advantages offered by fintech, opponents warn of potential negative consequences. The application of fintech in sustainability is a double-edged sword requiring further investigation.

This book provides an overview of fintech applications and considers their impact on the future of sustainable finance. It explores how financial technologies can enhance the sustainability of investment and corporate decisions and contribute to the fulfillment of the Sustainable Development Goals (SDGs). By considering practitioner and academic views, it examines whether and how fintech can improve sustainable practices, potential threats with possible solutions, and policies and regulations designed to improve sustainability benefits.

Table of Contents

Frontmatter

Introduction

Frontmatter
Chapter 1. Fintech and Sustainability: An Overview
Abstract
Financial institutions have, in recent years, increasingly begun to rely on the use of financial technologies (fintech) to provide more efficient and convenient services. Adapting to fintech innovations brings new challenges and opportunities. At the same time, sustainable finance has become the subject of interest for academics and practitioners alike. Both directly and indirectly, fintech be used to improve sustainability and influence policies and regulations. Issues such as climate change, water pollution, and non-renewable resource management can all be addressed in innovative ways with fintech. Unfortunately, as with any new technology, these innovations also present new challenges and environmental risks that need to be carefully monitored and controlled. Thus, fintech and its application in sustainability is a double-edged sword that calls for both consideration and caution. This book aims to provide an overview of various fintech applications with an analysis of how fintech will influence the future of sustainable finance. In this introductory chapter, we explore sustainability and sustainable finance, why they are important, and how fintech can be a catalyst for meaningful change. In addition, we offer a summary of the eleven chapters of this collection.
Thomas Walker, Harry J. Turtle, Maher Kooli, Elaheh Nikbakht

Fintech and Environmental Sustainability

Frontmatter
Chapter 2. Scaling up Climate Finance Through Blockchain-Based Digital Green Bonds
Abstract
This article opens with an overview of the current climate challenges. Although we have built the basis for climate goals such as the Paris Agreement, our trajectory does not point in that direction. Access to climate funding is predominantly biased in mitigating climate change. Given the limited effectiveness of mitigation approaches, we urgently need to raise the volume and proportion of climate adaptation finance. There is now a significant climate financing deficit to accomplish the Paris Agreement’s climate goals. Climate fintech may offer new ways of thinking and open new channels for climate financing as digital technology continues to advance. This paper uses digital green bonds as an example to discuss two issues related to the development of digital finance and the response to climate change: (1) How can we use digital technology to balance the needs of stakeholders when the traditional model of development based solely on the interests of shareholders makes it difficult to meet the needs of sustainable development and climate action? (2) How can we use a combination of digital financial instruments to encourage private investors to support climate change investments?
Yushi Chen
Chapter 3. Green Energy, Emissions, and Blockchain Technology
Abstract
In this chapter, we investigate and review how blockchain technology can facilitate and accelerate sustainable development by adopting renewable and clean energy and reducing greenhouse gas emissions. We first review the fundamentals and unique features of blockchain technology, such as immutability and transparency, and its applications in tackling challenging problems in a wide range of industries. We then examine the potential applications of blockchain solutions in the environmental ecosystem. We review and describe potential solutions and use cases, including secure green energy trading, green energy as digital assets, efficient tracking and reporting of CO2 and air pollution reduction, efficient tracking and reporting of sustainable energy creation, and ESG compliance methodologies and strategies. Finally, we analyze in detail a use case for the energy market, the Renewable Fuels Standard (RFS) program introduced by the Environmental Protection Agency (EPA), and propose ways in which blockchain solutions can improve the program. We consider the challenges and issues with the existing system in coping with the complicated landscape of environment protection and sustainable development, study the benefits and characteristics of blockchain-based solutions, and delineate potential challenges and opportunities going forward.
Tony Erwin, Baozhong Yang
Chapter 4. The Role of Green Finance in Supporting Maritime Sustainable Development
Abstract
This paper analyzes the role assumed by new forms of finance that are taking place within EU policies and in Italy, specifically through the National Plan for Recovery and Resilience (PNRR) (Social Impact Agenda for Italy, PNRR e Impact Investing, Sfide e opportunità, 2017; Gallucci in Green Finance - Finanza responsabile per la sostenibilità ambientale, Franco Angeli Edizioni, 2021) that falls under the scope of fintech. The goal of this research is to investigate the effects of certain financial measures envisaged by the EU Next Generation on the shipping industry. In particular, the study focuses on green bonds, which, within the European Union, from the very early stages of drafting the post-Covid-19 recovery plan, have been attributed a crucial role in achieving the objectives of the ecological transition. By conducting an empirical study, we suggest an application of green bonds in the maritime sector. Specifically, this study analyzes the effects of implementing the Cold Ironing Project, Green Ports’ innovative PNNR measure within the EU Next Generation. Considering that the reduction of emissions in ports is an issue of particular importance due to their proximity to human settlements, cold ironing provides a form of sustainable power for ships while they are docked in ports to provide electricity, lighting, cooling, heating, and other service auxiliaries.
Massimo Arnone, Tiziana Crovella

Fintech and Social Sustainability

Frontmatter
Chapter 5. Does Fintech Contribute to Fair and Equitable Outcomes?
Abstract
In an effort to enhance the accessibility of credit to marginalized populations while ensuring equitable outcomes, financial technology (Fintech) companies are increasingly leveraging alternative data sources and sophisticated machine learning algorithms to better inform their lending decisions. However, anecdotal evidence, that received widespread media coverage and attention, suggests that these firms have not fully delivered on their promise. Given the recency of the topic, academic research in this area remains limited, thereby offering limited guidance. In this chapter, we aim to investigate the extent to which Fintech contributes to fair and equitable outcomes. To address this question, we provide an overview of emerging trends in Fintech, particularly in the context of consumer lending, discuss the existing regulatory framework, examine notable anecdotal evidence, and finally, review the available academic research on the subject.
Lakshmi Shankar Ramachandran
Chapter 6. Fintech, Financial Inclusion, and Social Challenges: The Role of Financial Technology in Social Inequality
Abstract
This chapter reviews the emerging literature on the interaction between fintech, financial inclusion, and social inequality. Given the focus of institutions and regulators’ attention on climate change and the need to reduce emissions and guide the economy towards a green future, the application of technology to finance can provide an important contribution in the transition towards a more equal and inclusive social context. In this chapter, we investigate how financial technology and fintech companies can facilitate the implementation of the United Nations 2030 agenda and the achievement of the Sustainable Development Goals (SDGs), which require the full inclusion of all actors in the financial system. New technologies can reduce costs while increasing speed and accessibility, enabling more personalized and scalable financial services. In this way, they can allow for easier access to banking services and payment instruments, promoting economic growth and helping to solve a range of social problems such as low employment, poverty, and income inequality in both developed and developing countries. In fact, financial inclusion is not only an objective but also an enabler and accelerator of economic growth. Furthermore, fintech platforms may be able to channel resources into achieving sustainable social goals. The question is, therefore, how financial technology and fintech companies can affect the reduction of social inequalities. By analyzing the most important contributions of scholars on the subject, this study aims to highlight the role that fintech has or could have in the path towards the 2030 social goals and the elimination of inequalities. Finally, we investigate the main critical issues related to low financial literacy, highlighting the need to activate tools complementary to the construction of infrastructures for the effective achievement of financial inclusion objectives.
Simona Cosma, Giuseppe Rimo
Chapter 7. The Metaverse’s Inspiration for Sustainable Business: Restructuring Economic Logic, Capital, Assets, Organization, and Industry
Abstract
The metaverse is persistent, synchronous, and real-time, with no limits on concurrent users, a fully featured economy, a diverse range of experiences, unprecedented interoperability, and a diverse range of content and experience creators. This article systematically introduces the metaverse to sustainable business, demonstrates the potential of the metaverse, and explains how the metaverse can form new capital, asset types, novel organizational forms, and industrial models by reshaping economic mechanisms, capturing multiple values, enhancing sustainable development, creating more equitable and personally stimulating jobs, and ushering in the development of a more circular economy. The article also warns that the energy consumption of the metaverse itself cannot be ignored and that the sustainable development of the metaverse needs to follow the route of carbon neutrality.
Yushi Chen

Fintech and Governance Sustainability

Frontmatter
Chapter 8. Circular Economy: A Fintech Driven Solution for Sustainable Practices
Abstract
All over the globe, we face environmental challenges. As animal extinction accelerates and the weather becomes more volatile with record-breaking heat waves across the United States and Europe, for example, sustainable practices have become central to economic development. With investors moving capital into environmental, social, and governance (ESG) oriented investment funds at a sky-rocketing pace, businesses are adapting to the changing dynamic in many ways, including implementing solutions developed by financial technology (fintech) companies. Among other things, fintech companies play a central role in developing the circular economy. To reduce inputs and improve recyclability, circular business models require greater transparency and traceability throughout the supply chain to ensure efficiency. Platforms based on the digitalization of services or blockchain are examples of solutions for reducing information asymmetry in today’s business environment. In this chapter, we first present the importance of the circular economy in tackling today’s environmental challenges and explore industries in which circular business models are most likely to be successful. Next, we expand on the types of solutions fintech can provide to improve efficiencies in the supply chain of businesses. Finally, we present concrete examples of companies implementing these solutions and their impact on society.
Vincent Grégoire, Kevin Guay
Chapter 9. The Role of Fintech in the Field of Sustainability and Financing
Abstract
The financial sector’s contribution to the transition to a sustainable economy is exacerbated by numerous challenges. The aim of this chapter is to demonstrate and discuss the significant role that fintech can play in fostering “sustainability in financing” and “financing of sustainability”. This overview outlines the present state of each technology, illustrates its potential to contribute to current challenges, and offers a variety of use cases. It follows all major fintech technologies, from automation, big data, AI, and DLT to quantum computing.
Niccole Jordan, Patrick Röthlisberger, Julia Meyer, Beat Affolter
Chapter 10. The Mediating Role of Fintech on ESG and Bank Performance
Abstract
Despite the heated debate on banking transformation, there is little research on the performance of commercial banks and how they have been affected by fintech and environmental, social, and governance (ESG) goals. There have been several recent studies on the role of ESG in finance, but only a few studies explore the role of fintech either directly or indirectly. To address this gap, this study uses PLS-SEM, quantitative research, and a novel framework for describing the mediating role of fintech on ESG and bank performance in European Union (EU) commercial banks. Based on our research, we find that ESG has a positive impact on bank performance. More importantly, we find that fintech has a mediating effect on ESG and bank performance. Our study suggests that banks that are more engaged in fintech perform better with respect to environmental, social, and governance goals, which, in turn, leads to improved performance. Our findings provide information that will be of interest to financial decision-makers and regulatory authorities in elucidating the impact of fintech and ESG on commercial banking.
Nur Badriyah Mokhtar, Ashraful Alam
Chapter 11. Integrating AI to Increase the Effectiveness of ESG Projects
Abstract
Sustainable assets and sustainable investing strategies, including the increasing prominence of environmental, social, and governance (ESG) products and initiatives have led to an uptake in interest in financial sustainability. While interest in sustainable projects and concepts should be applauded, there are reasons for caution. How are these investment strategies being vetted or verified as green? Greenwashing—superficially labeling activities as sustainable—is a phrase that has existed for nearly as long as the green asset movement. Periodic scandals have rocked the sector for decades as well, but the rise of artificial intelligence (AI) represents a technology that may assist in rectifying some of these issues. This chapter brings together two topics that impact one another: artificial intelligence and the green asset sector. It provides definitions and context before a more fulsome discussion.
Sean Stein Smith
Backmatter
Metadata
Title
Fintech and Sustainability
Editors
Thomas Walker
Harry J. Turtle
Maher Kooli
Elaheh Nikbakht
Copyright Year
2023
Electronic ISBN
978-3-031-40647-8
Print ISBN
978-3-031-40646-1
DOI
https://doi.org/10.1007/978-3-031-40647-8