Open Banking is proving to be a crucial tool in the fight to reduce carbon footprint and behave more sustainably – for individuals and businesses alike. By plugging Open Banking tech into digital services, people are able to track and change their behaviour in a meaningful way – from buying more environmentally friendly products to investing in sustainable companies.

The environmental impact of our consumption habits is a global concern, and many of us are trying to find ways to reduce it bit by bit. In the race to create new digital services that help people and businesses reduce their carbon footprint, Open Banking is increasingly becoming one of the best places to start – as the realisation grows that financial data can play a big part in the fight against climate change.

Regulatory pressure is mounting on a European level for banks and financial institutions to take steps to ensure the financial system can manage sustainability-related risks, and that investments and loans reach green and low-carbon initiatives. As part of this, banks need to engage with customers and gather data to understand their circumstances, helping them to prepare for the switch to a low-carbon economy.

New digital services focused on sustainability have begun to pop up over Europe. They focus on helping a) individuals directly through consumer apps, or b) banks to reach their customers through services attached to their accounts. There are even some new banks that offer ecological bank accounts to help people track and offset their carbon footprint. These tools leverage the opening up of financial data to help people understand their environmental impact – with great success. Here are a few examples from across Europe.

Carbon tracking through your bank

Let’s look at French carbon tracker Greenly. Just a year after launch it’s already been the force behind 2.5 million people in France not only measuring and understanding their carbon footprint but improving it.

According to Greenly, Europeans have an individual carbon footprint of around 15 tonnes of CO2 a year on average. To meet the EU goal of being carbon neutral by 2050, the figure needs to be more like 3.5 tonnes. So Greenly has stepped in to help people and businesses easily understand and track their carbon footprint, whilst helping them change their behaviour in a meaningful way. It’s not only doing this through its app for individuals and businesses, but also works with banking giants such as BNP Paribas in France, to offer carbon tracking to its customers through their banking app.

In a nutshell, Greenly automatically tracks the impact of every expense a person makes and puts this into a dashboard to show them what to focus on to reduce their carbon footprint – made possible by aggregating transaction data from bank accounts across Europe. And it’s working. The users who engage with their dashboard at least every two weeks have a carbon footprint 20% lower than the average Greenly user.

Understanding the carbon footprint of a business has traditionally been just for big corporations. But smaller companies are under increased pressure to do the same. Any business can create its own carbon tracking dashboard as easily as an individual can, because Greenly has automated what is usually a very time intensive and manual process.

Set goals to cut impact

Swedish app Svalna lets individuals and businesses connect to their bank account in seconds, aggregating their transaction data, which is then categorised. The transaction data can show everything from shopping to travel and the type of energy that’s consumed.

Svalna’s custom scoring model then gets to work, helping people calculate how green their lifestyle or business is. Once the results are in, Svalna encourages its users to set goals and gives them personalised suggestions on how to reach them. They can also create groups, so users can work together to have a bigger positive environmental impact, or compete to reduce their footprint the most.

Making investing ethical

Danish startup make!impact could see that people were becoming more conscious about the way they consume products and services. Impact investing is one way to speed up the process of making a difference to the planet. And the more people realise the societal and financial benefits of impact investing, the more companies will start to engage themselves in being socially responsible.

Historically, investing has been limited to a privileged and educated group, but make!mpact is working to change that – targeting a younger audience that’s hard to reach and often underserved by the investment community. “Half of our users said they have never invested before and 44% are women,” says Varan Pathmanathan, CEO. “It’s great to see that we can encourage a new group of people to start investing in companies that share their values, helping to make a more sustainable future with businesses that are here to stay.”

By embedding account aggregation technology into make!mpact, people can link to their investment accounts in seconds, and give make!mpact permission to view their stocks and shares in real-time. Without aggregation technology, users would have to manually input the companies or stocks they are invested in – causing drop offs.

make!mpact’s algorithm then helps users see how sustainable their investments are – based on the UN Sustainable Development Goals. Users can easily track which companies are behaving ethically and which UN goal they are supporting. Based on the account information that’s gathered, make!mpact will nudge users to take action on where their money is invested.

Just the beginning

Open Banking offers a way for banks and fintechs across Europe to build services that really make a difference, by using transaction data in a meaningful way. And what we have seen today is just the first step.

With the UN climate change conference Cop 26 looming later this year, and financial services in the firing line to drive the change that’s needed for countries to meet net zero commitments, we are set to see much more innovation. Services that leverage Open Banking can encourage people and businesses to become more conscious of what they buy, how they behave and what they invest in – improving their impact on the planet.

[The author of this article, Rafa Plantier, is Head of UK and Ireland at Tink]

Helen Child, Founder & CEO, Open Banking Excellence