🧭 AI in fintech compliance & Estonia's climate fintech rise

Explore Estonia’s leadership in climate fintech, AI-powered risk monitoring tools, and a $789B green finance opportunity for SMEs.

Author

Bhuva Shakti
December 05, 2024 • Estimated Reading Time: 14 minutes

Hey there! đź‘‹

Last week, we spotlighted breakthroughs in carbon credit insurance, wildfire risk management innovations, and the $5 trillion GSS bond milestone. This week, we’re diving into Estonia’s impressive climate fintech growth, cutting-edge AI tools for risk management, and the untapped $789 billion green finance opportunity for SMEs.

At the BIG Risk Navigator, we’re committed to bringing you the latest insights on sustainability, climate finance, and innovative tech solutions that help you build resilient, future-focused businesses.

Now let’s get into the news.

  • $789 billion green finance opportunity awaits SMEs, ICC and Sage Report reveals: Unlocking sustainable finance for SMEs is essential for accelerating global climate action.

  • Multilateral climate funds launch AI-powered climate Project Explorer at COP29: An innovative AI-powered search platform designed to enhance access to climate finance information.

  • IFRS Foundation publishes a guide to help companies identify, disclose sustainability risks: This initiative underscores the ISSB’s commitment to supporting the global adoption of its standards.

  • AI risk management pioneer Calvin Risk secures $4m in seed funding: Calvin Risk’s platform provides real-time, adaptive assessments, offering organizations a comprehensive view of their AI models’ risks and compliance with regulations.

  • Atom becomes first UK bank to commit to being carbon positive by 2035: Atom Bank, the UK’s first app-only bank, has purchased 25 acres of newly planted broadleaf woodland in Northumberland.

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🎯 Estonia leads in climate FinTech with the highest female founder rate and startups per capita

Tenity, a global accelerator with offices spanning from Zurich to Singapore and Tallinn, has released its Climate Fintech Report 2024. 

Estonia, which has ambitious climate goals, has emerged as a strong player in the FinTech niche — the report highlights the country’s standout performance across several key metrics, including startups per capita and the rate of female founders.

  • Estonia experienced a strong 24% increase in funding for climate FinTech startups in 2023 compared to 2022, defying the global trend of a 23% decline in funding.

  • Estonia holds the top spot globally for female founders in climate FinTech, with 44% of startups having at least one female co-founder. This figure puts Estonia ahead of other leading markets like Canada (43%) and the UK (42%).

  • Estonia leads globally in climate FinTechs per million inhabitants, boasting 11.8 startups in this category.

  • Estonia excels in Digital Investment Solutions and Carbon Offset Markets & Credits, with many startups overlapping across both categories.

Why it matters for climate fintech: Estonia's success in climate fintech can be attributed to several factors, including:

  • Strong digital infrastructure: The country's advanced digital infrastructure and e-governance initiatives provide a solid foundation for fintech innovation.

  • Supportive regulatory environment: Estonia's progressive regulatory framework encourages entrepreneurship and fosters a conducive environment for fintech startups.

  • Talent pool: The country boasts a highly skilled workforce with expertise in technology, finance, and sustainability.

These factors have combined to create a thriving climate fintech ecosystem, attracting both domestic and international talent and investment.

Key implications for startups: However, Estonia’s climate FinTech ecosystem is still in the early stages of development compared to markets like the UK, with the majority of Estonia’s climate FinTech companies having been founded between 2020 and 2022. Only 6.25% of those are at the Series A growth stage, while the UK has 27.44% of its companies at this stage.

🎯 Grasshopper teams up with EnFi for enhanced AI-powered risk monitoring

Grasshopper, a digital bank focused on the business and innovation economy, has partnered with AI-driven EnFi to enhance operational efficiency and expand its digital banking capabilities.

The platform employs real-time data aggregation and advanced analytics to transform traditional credit assessment and risk management. Its proprietary Continual Risk Analysis™ model allows financial institutions to shift from periodic reviews to a proactive risk management approach, enabling timely, strategic lending decisions.

Why it matters for climate fintech: Through this collaboration, Grasshopper and EnFi aim to redefine the credit risk assessment process by utilizing real-time AI-driven insights, helping Grasshopper streamline traditionally time-intensive processes.

EnFi’s platform will allow Grasshopper’s underwriters to make proactive decisions, optimizing the bank’s ability to meet the needs of its clients in a fast-evolving business landscape.

Key implications for startups: By continually adopting innovative banking solutions, Grasshopper is strengthening its position in the digital banking space and reinforcing its dedication to supporting the growth of startups and small businesses.

🎯 Fintel Connect introduces automated compliance tool for BaaS banks

Fintel Connect, a leading growth marketing platform for the financial sector, has introduced a new tool designed to simplify the monitoring of fintech partner marketing activities for Banking-as-a-Service (BaaS) sponsor banks and middleware providers. Fintel Check for BaaS leverages automation to streamline compliance checks, reduce manual effort, and enhance overall efficiency.

The new tool addresses the specific challenges faced by BaaS banks in managing the marketing activities of their fintech partners. By automating the scanning, evaluation, and documentation processes, Fintel Check helps banks ensure compliance with regulatory requirements and maintain brand reputation.

Why it matters for climate fintech: While Fintel Check for BaaS is primarily aimed at the broader fintech industry, it has implications for climate fintech startups as well. As climate fintech companies often partner with banks and other financial institutions to scale their solutions, effective monitoring and compliance are essential.

By streamlining the onboarding and monitoring processes for fintech partners, tools like Fintel Check can help accelerate the adoption of climate fintech solutions. This can lead to increased investment in sustainable finance, faster deployment of green technologies, and a more sustainable future.

Key implications for startups: HClimate fintech startups can benefit from the introduction of Fintel Check for BaaS in the following ways:

  • Simplified partner onboarding: Streamlined compliance checks and automated documentation can expedite the onboarding process for startups partnering with BaaS banks.

  • Enhanced brand reputation: By ensuring that partners adhere to regulatory standards and maintain high ethical standards, startups can protect their brand reputation.

  • Increased efficiency: Automation of monitoring tasks can free up resources for startups to focus on product development, innovation, and customer acquisition.

🎯 $789 billion green finance opportunity awaits SMEs, ICC and Sage Report reveals

âś… Key Insights

  • Only 2.8% of SMEs have accessed green finance, leaving a $789 billion opportunity untapped.

  • Simplifying sustainability reporting can unlock significant funding and accelerate climate action among SMEs.

  • SMEs with sustainable finance are 2.5 times more likely to implement major sustainability initiatives.

The International Chamber of Commerce (ICC) and Sage have released a global report unveiling a $789 billion green finance opportunity for small and medium-sized enterprises (SMEs). Despite this vast potential, a significant gap exists between SMEs’ sustainability ambitions and their ability to secure funding for green initiatives.

🎯 Multilateral climate funds launch AI-powered climate Project Explorer at COP29

âś… Key Insights

  • The Climate Project Explorer consolidates nearly 4,000 climate projects funded by four major climate funds into a single, searchable platform.

  • AI-powered search and filtering options enable stakeholders to discover key information, fostering collaboration and best practices.

  • The tool aims to strengthen access to climate finance and support developing countries’ climate goals by increasing transparency and streamlining information.

At COP29, the Multilateral Climate Funds (MCFs)—comprising the Green Climate Fund (GCF), the Adaptation Fund, the Climate Investment Funds (CIF), and the Global Environment Facility (GEF)—announced the launch of the Climate Project Explorer, an innovative AI-powered search platform designed to enhance access to climate finance information.

🎯 IFRS Foundation publishes a guide to help companies identify, disclose sustainability risks

âś… Key Insights

  • The IFRS Foundation has introduced a comprehensive guide to help companies identify and disclose material sustainability-related risks and opportunities impacting their financial future.

  • The guide elaborates on how companies can understand sustainability dependencies and impacts as described in the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information.

  • Companies already following IFRS Accounting Standards will find it easier to integrate sustainability-related disclosures with financial statements, enhancing connectivity for global investors.

The International Sustainability Standards Board (ISSB), under the IFRS Foundation, has published a new guide to aid companies in identifying and disclosing material information related to sustainability risks and opportunities. This initiative underscores the ISSB’s commitment to supporting the global adoption of its standards.

🎯 AI risk management pioneer Calvin Risk secures $4m in seed funding

âś… Key Insights

  • The investment brings the Swiss startup’s total funding to over $5m since its inception in 2022.

  • Calvin Risk’s platform provides real-time, adaptive assessments, offering organizations a comprehensive view of their AI models’ risks and compliance with regulations.

  • This modular framework supports governance digitisation and automated AI testing, catering to industries like financial services, transportation, and telecommunications.

Calvin Risk, an ETH Zurich spin-off specializing in AI risk management and governance, has raised $4m in a seed funding round led by Join Capital and seed + speed Ventures. The Zurich-based company focuses on helping enterprises deploy artificial intelligence (AI) safely, offering automated testing and quantitative risk assessments to tackle operational risks such as bias, opaque decision-making, and unpredictable behaviour in AI systems.

🎯 Atom becomes first UK bank to commit to being carbon positive by 2035

âś… Key Insights

  • Atom Bank, the UK’s first app-only bank, has purchased 25 acres of newly planted broadleaf woodland in Northumberland.

  • Atom’s current annual operational emissions range between 500 and 700 tonnes.

  • Atom bank has been measuring its carbon impact for three years and reported a 2.2% reduction in operational emissions in the last financial year.

Atom Bank, the UK’s first app-only bank, has made headlines by purchasing 25 acres of newly planted broadleaf woodland in Northumberland, as it becomes the first UK bank to commit to being carbon positive by 2035.

Sustainable finance and global efforts to combat desertification: an overview

Over the past two decades, climate change has exacerbated desertification, intensifying its impacts on biodiversity, food security, and water availability. However, a significant global effort has also unfolded to address desertification, often led by the UN Convention to Combat Desertification (UNCCD) and underpinned by sustainable finance mechanisms.

âś… Highlights 

  • Emergent financing mechanisms 

  • Impact investing projects 

  • Scaling up sustainable finance to meet future challenges

Sustainable finance includes a range of financial instruments, such as green bonds and sustainability-linked loans (SLLs), which are designed to achieve environmental objectives while generating returns for investors. These financial instruments have become important ways to mobilize the capital needed for land restoration, sustainable agriculture, and climate resilience projects—all of which contribute to mitigating desertification.

 Embracing AI for enhanced regulatory compliance in FinTech

âś… Highlights 

  • A Time for Innovation in regulatory reporting

  • The top 3 focus areas to enhance

  • The top 3 focus areas to enhance

A recent whitepaper by Regnology delves into the significant potential of artificial intelligence (AI) to revolutionize regulatory reporting, highlighting both the challenges and opportunities it introduces. As firms navigate this evolving landscape, the implementation of AI presents a promising avenue for enhancing efficiency and accuracy in compliance processes.

3 ways to use machine learning and AI in risk management

Explore how AI transforms risk assessment and management processes.

https://www.bhuvas-impact.global/post/machine-learning-and-ai-in-risk-management

AI ethics expert for startups: helping navigate ethical AI in startups and climate fintech

Insights on integrating AI ethics into sustainable startup growth.

https://www.bhuvas-impact.global/post/ai-ethics-expert-for-startups

How to identify risks in business: insights from a fractional COO

Practical strategies for identifying risks and enhancing management practices.

https://www.bhuvas-impact.global/post/how-to-identify-risks-in-business-insights

đź“° Share this newsletter with a friend and start to stand out in the executive meetings.

🖇️ Connect with me on LinkedIn for daily insights on expanding into the US market.

🤝 Need a board director? Reach out to me today.