FinTech Can Help Fill Climate Resilience Gaps In Emerging Markets

The fuel crisis spreading across Europe and Asia highlights the weather-related vulnerabilities faced by global energy systems. As wind and solar falter under intermittency, power generation has defaulted to gas, where demand is being squeezed by early-autumn heating and late-summer electric cooling needs across Eurasia. The reverberations of February’s polar vortex in Texas—which froze gas output—continue to be felt as resulting low reserves run dry and Gazprom dithers. The resiliency of energy supply chains is being put to the test—and failing.

Fuel disruptions are one thing; shortages of food could be even more disastrous. Energy and food commodity markets have become increasingly intertwined as surging demand for biofuels pump up grain and oilseed prices. Agriculture is even more vulnerable to climate impact than fuel is; this summer alone saw drought batter the grain belts of North American and Central Asia, while Brazil—a global food product leader—is being ravaged by wildfire, drought, and frost, leaving agriculture markets in turmoil.

To assure the sector’s resiliency, supply chains must be bolstered, risk must be better understood, and new capital must be leveraged to allow the global food system to withstand increasingly severe climate shocks. In short, what is needed is financial innovation.

Emerging and frontier markets have proven fertile ground for novel financial technology, or ‘fintech’. Rapid economic growth and large segments of the population who are digitally connected yet without access to traditional banking have allowed these countries to leapfrog their way to financial post-modernity. In China, AliPay and WeChat Pay have pioneered mobile payment innovations to amass over a billion users each—becoming powerful enough for the Communist Party to initiate a crackdown.

Outside China, other markets have fostered their own fintech behemoths. In Brazil, bank bureaucracies that make obtaining credit cards a Kafkaesque ordeal have enabled the growth of Nubank, whose streamlined approval process has attracted 40 million customers, making it the world’s largest digital bank. In Kenya, M-Pesa’s mobile app handles wage deposits, insurance, and bill payments to the point that half of Kenya’s GDP is transferred over its servers. Meanwhile, Paytm—a phone top-up service turned digital remittance platform, insurance broker, and deposit-taker—is preparing for an international public offering expected to be India’s largest ever at $2.2 billion.