The environment is a new frontier for fintech
With government help, RateSetter hopes to make green investment profitable.
Bill Clinton once described global warming as “the greatest economic opportunity of our lifetime”.
And RateSetter has taken him seriously, unveiling Australia’s first green loan marketplace, seeded with A$20 million from the government’s Clean Energy Finance Corporation.
“This… offers the potential to improve the marketability of green assets by bringing purchasers, installers, and manufacturers closer together,” said Ian Learmonth, CEO of CEFC.
“There have been green loans before, and there has been peer-to-peer lending, but combining the two into one platform is an Australian first.”
The new marketplace will match investors with borrowers looking to take up “green technologies”. What qualifies as green technology will be determined by RateSetter in accordance with industry and government guidelines.
Both parties hope the marketplace will hit two birds with one stone: providing returns for investors while lowering greenhouse gas emissions.
RateSetter estimates that average returns will be 7 percent and loan tenure 3 - 7 years, although the company emphasises that actual rates will be determined on the day by its investors.
“This… showcases the exciting opportunities for both businesses and consumers when Government agencies such as the CEFC team up with the fintech sector,” said Daniel Foggo, CEO of RateSetter Australia.
“For the first time, everyday investors have direct access [to] attractive returns from a green asset-class, while green borrowers are rewarded with great rates.”
Green investments as an asset class have been rising in popularity this decade. A 2016 report from The Global Sustainable Investment Alliance found the total amount invested in funds with environmental principles had grown from US$148 billion to US$516 billion across Australia and New Zealand from 2014 - 2016. It also found the ANZ was one of the fastest growing markets for environmentally conscious investment.
Their popularity is being boosted by a number of factors, the most prominent of which is political.
University campus activists and environmental pressure groups - like Greenpeace and 350.org - have been lobbying financial institutions to divest from fossil fuel companies, trying to take away the “social license” of extractive industries.
Government initiative has also played a big role. The CEFC itself was created in 2012 by the then-Labor government as a guiding hand to shape green energy markets. Governments worldwide have created green investment banks with the same motivation.
Less than one day in, RateSetter’s platform has seen over $50,000 in activity.