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Are You Ready For Climate Fintech? – Wealth Tech Digest #8

Key takeaways

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✅ Are You Ready For Climate Fintech?

Our first article today focuses on digital financial technologies that are working towards a greener world. 2020 saw an explosion of climate-focused fintech products and companies. The public’s focus on climate change is still going strong, and this reality is inspiring innovation. But how do we combine a financial product with climate technology? One example can be seen in Stripe and their recent launch of Stripe Climate. This tool allows online businesses to redirect a portion of their proceeds to emerging technologies dedicated to reducing carbon footprints. Stripe Climate has already gone global and signed up over 100 companies in Europe. One important element of the new tool is the climate credentials that are included. Companies can display and promote these credentials to show customers their environmental commitment.

Cooler Future is a Finnish fintech that is worth taking a look at when it comes to climate-related investments. They are building a retail stock investing app focused on climate impact. We also have Trine, which lets its users invest in clean energy in emerging markets. And also Carbon Collective – a robo advisor focused on building portfolios with low-climate impact companies. And when we move into neobanks, we find Carbon Zero. They claim to take a car off the road for a day for every $10 dollars you spend. Carbon Zero also donates part of its credit card interchange revenues to carbon removal. And, they help their cardholders track their own carbon footprints. Aspiration is a climate-focused option focused on making the world greener. They let users round up their purchases to the nearest dollar and the change is used to plant trees. And these are just a few examples of the amazing innovations happening in climate Fintech. But one huge question remains: will these firms make money?

Let’s hope that offsetting climate change is a reliable and profitable business strategy and not just a PR opportunity.

✅ Where Will HSBC Go Now?

Next today we take a look at HSBC and the challenges that are forcing them to change their plans. The company recently announced that it would be pivoting to focus on wealth management in Asia. As Europe’s biggest bank, this pivot highlights the tough outlook for the banking sector. COVID-19 brought a sharp drop in HSBC’s annual profits. The company reported a before-tax profit of $8.78 billion for 2020. That’s a 34 percent drop from a year earlier. Combined with margin pressure and mounting losses in Europe, HSBC has been forced to refocus where the profits are. And Asia provided the dominant share of the bank’s profits in 2020. Profits from its wealth management and personal banking division in Asia reached $5 billion last year. And further growth in Asia over the next five years will be fueled by close to $6 billion of additional investments.

These investments will be targeting the company’s wealth management and international wholesale businesses. HSBC has also said that it would be making large cuts to some of its back-office functions. After eliminating 11,000 jobs last year, it has signaled that further cuts are on the way. It will be interesting to see how Europe’s biggest bank fares with all of these changes.

✅ Is WellsFargo Dropping Out Of Wealth Management?

And finally today we have a huge announcement from Wells Fargo & Co. It has agreed to sell its asset management business to private equity firms. Wells Fargo manages more than $603 billion dollars in assets for their customers. And now Reverence Capital Partners and GTCR LLC will be purchasing the management of those assets for $2.1 billion dollars. Wells Fargo will retain a 9.9 percent stake in the asset management unit. And It will continue on as a client and distribution partner.

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