We’ve heard a lot more about the net zero goal in recent years.
Since 126 countries signed the Paris agreement at COP 21 in 2015, climate change has been highly focused on the agenda of international governments. Further finalization of the agreement at COP 26 in late 2021 in Glasgow sees further strengthening efforts.
Fintech is seen as playing an important role in achieving climate change goals. The United Nations estimates that meeting the climate change goals will require investment of $90 trillion to create sustainable infrastructure by 2030. At COP 26, new financial pledges were made to support developing countries in achieving this goal.
Switch to a circular economy
An important factor that is part of the European Commission’s efforts to create a more sustainable society is developing a circular economy.
The European Green Deal sets out a plan to create sustainable growth within the EU. It outlines plans to make Europe a “modern, resource-efficient and competitive economy.”
In addition to achieving net zero emissions, they focus on creating an economy that can achieve growth without being tied to the use of resources.
This target led to the establishment of a new Circular Economy Action Plan (CEAT). Measures will be put in place to, among other things, make sustainable products the norm and ensure less waste in an effort to lead global efforts on a circular economy and reduce pressure on natural resources.
In March and April 2022, they have adopted various regulations in line with this plan. This includes implementing increased visibility regulations regarding company compliance with net zero targets and initiatives focused on increasing the use of sustainable packaging and reusable products.
The term ‘circular economy’ refers to the cycle of reuse of objects and where they are traditionally disposed of. It provides an alternative to the traditional “linear economy” that has been the general state of the game over the last few decades. The “extract, use, discard” consumer mentality.
According to the World Economic Forum, in 2019, more than 92 billion tonnes of materials were extracted and processed, contributing to half of global CO2 emissions. Moreover, the waste products of this continuous cycle of manufacturing and disposal, plastics, food, textiles, etc., cause their own adverse effects on the global ecosystem.
The circular economy model is reported to have the potential to generate $4.5 trillion in economic returns by 2030; however, currently, only 8.6% of the world operates this way.
Focused business improvement
Community involvement occurs at several levels. The Twig group is one of many businesses focused on making the circular economy more accessible to consumers.
When opening an account with their mobile banking solution, TwigPay, clients can upload the item they wish to exchange, crediting their account instantly with the equivalent value to make a purchase. The articles are then sent to Twig.
The company has won multiple awards and has partnered with multiple platforms to streamline its services. The latest addition to the platform is their partnership with Mobi Markets, which is reportedly a strategy to strengthen its circular payment proposition.
Mobi Market is one of the fastest growing used mobile online marketplaces in Europe and has significant relationships with insurance companies and related network providers.
Geri Cupi, founder and CEO of Twig, commented: “We are thrilled to welcome Mobi Market and its team to our Twig ecosystem. We look forward to joining forces to bring another dimension to circular economy services and delight our customers.”
According to various studies, the main user group of companies today consists of GenZ and Millennials, the sector that is most concerned with sustainable practices.
In a study conducted by the United Nations Development Program, it was found that 65% of people aged 18-35 years consider climate change to be an emergency, with a higher percentage of children under 18. Most of their product offerings aim to serve this. demographics, and they have plans to expand to the Web3, although there are few details at this point.
Finance and circular economy
By directing funds to initiatives and businesses that support the model, finance can support the creation of a circular economy.
However, apart from creating a thriving circular economy for global benefits through sustainable growth, the model is also seen as creating investment opportunities.
According to a study by Bocconi University of more than 200 European companies across 14 industries, the more circular a company is, the lower the risk of default.
The analysis found that adopting circular practices can reduce risk and increase resilience through better anticipation of tighter regulations and changing customer preferences, better environmental impact, and the creation of the ability to grow without being associated with increased use of resources.
More and more businesses are turning to circular models to increase growth and resilience to long-term risks.
There has been a significant increase in debt and equity instruments created with this focus in the last two years. At the end of June 2021, 13 public equity funds focused on the circular economy, with a total asset value of $8 billion under management since 2019. In addition, more than 35 corporate and sovereign bonds have been issued to help finance circular economy activities.
Institutional asset manager BlackRock has been increasing investment in its circular business model over the past few years, creating a fund in October 2019 with this focus.
Paul Bodnar, Global Head of Sustainable Investing at BlackRock, said, “If you are an investor focused on long-term value creation, and you live on a planet with limited resources, you have an interest in a circular economy.”
Larry Fink, CEO of BlackRock, agrees, “The concept of a circular economy is very important. This is a good way to invest, not just for social reasons, not just for environmental reasons, but for investment reasons, performance reasons.”
They are not alone. ING has committed $118 million for improvements that have a positive environmental impact in areas including the circular economy. Lloyd’s Bank has set up a $2.6 billion Net Growth Financing that offers discount loans to SMEs with ‘green objectives’ including circular businesses, among many others.
A report by the Ellen MacArthur Foundation, a leading body in supporting and researching the circular economy, shows that nearly 600 companies, 130 of them with revenues of more than $1 billion, have started measuring the progress of their circular economy.
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Isabelle is a creative project manager and freelance journalist with a BA Honors degree in Architecture and an MA in Photography and Visual Media.
With over five years of experience in the art and design sector, Isabelle has worked on projects, wrote for real estate development magazines and design websites, and managed art industry initiative projects. He has directed independent documentaries about artists and the esports sector and assisted in producing BBC Two’s Venice Biennale: The New Voice of England.
Isabelle’s interest in fintech stems from a longing to understand the rapid digitization of society and the potential it holds, a topic she has discussed many times during her academic pursuits and journalistic career.