The energy transition is a concept that arose due to climate change; it is a process that seeks to implement worldwide changes in the energy sector through the reduction of greenhouse gas emissions based on long-term planning and strategy. Its main objective is to change the energy consumption derived from fossil fuels to use “cleaner” energy from renewable sources.
However, since it is a long-term and large-scale process, one of the most critical factors (on which its execution and implementation depend) is the economic resources obtained through public or private investment. Below, we will learn why the role of banks and Fintechs is fundamental in the energy transition.
Innovation and financing
One of the most critical roles that banks and Fintechs play in the energy transition is that through the financing of new solutions and technologies, they can drive innovation in companies in the energy sector, which contributes to the development of new products or services that contribute to the advancement of the energy transition.
Banks and Fintechs play a vital role in the energy transition. They can offer technological platforms and economic resources through credits, loans, and other financial products to people or companies that want to develop renewable energy or energy efficiency projects. The beneficiaries can be diverse, from startups working on renewable energies to companies developing energy storage technologies or smart grids.
Assist with financial risk management
While investment is essential in the energy transition, we must also know that not all projects are viable or feasible. At this point, banks and Fintechs play a vital role. They help manage financial risks by assessing the viability, feasibility, and profitability of projects associated with the energy transition; this allows them to determine whether such projects are sustainable and financially sound.
Assisting in policy decisions
Governments and state institutions usually take the first steps of an energy transition. At this point, banks can help make the most appropriate political decisions to promote the energy transition, as banks can advise senior officials on the subject or help governments develop policies and regulations related to the energy transition; this will allow them to adopt new renewable energies and consume the energy currently produced in the country more efficiently.
On the other hand, Fintechs can provide different technological platforms to governments, allowing them to collect and analyze large amounts of energy-related data, including consumption patterns, energy production, and market trends. These analyses can provide valuable information for policymakers when making informed energy policy decisions.
Integration of environmental and governance criteria
Banks and Fintechs can incorporate ESG criteria (environmental, social, and corporate governance factors) into their financial services, lending, and investment policies for companies, institutions, and individuals, ensuring that the projects financed are helpful to society, environmentally sustainable, and socially responsible.
Helping to raise awareness
An important point to achieve an adequate energy transition (without affecting people in their current lifestyle) is to create “awareness” about the importance of this process for the planet. Here, banks and Fintechs play an essential role, as they can help make “awareness” to people, directly educating their customers about the importance of using renewable energies and the benefits of consuming green products and services (products/services that throughout their life cycle identify and reduce their negative impacts on the environment).
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