In the dynamic landscape of financial institutions, a new wave is making waves – Green Neobanks. The year 2020 witnessed the inception of Green-Got and Helios, two French neobanks on a mission to not only redefine online banking but also to champion environmental causes. As these institutions target an eco-conscious clientele, the pressing question lingers: can they truly make a significant impact on the daunting challenge of climate change, or are they merely a drop in the vast ocean of environmental issues?

The Fossil Fuel Connection: A Catalyst for Change Unveiled

Delving into the origins of green neobanks reveals a pivotal catalyst – the profound entanglement of traditional French banks in the global fossil fuel industry. In a groundbreaking investigative report unveiled in September 2023, a startling revelation emerged: between January 2016 and June 2023, French banks assumed a substantial role in over half of the bonds issued by the fossil fuel industry worldwide. This revelation didn’t merely expose financial transactions; it illuminated the intricate ties between established financial institutions and the fossil energy sector, shedding light on the indirect but influential role these banks played.

It’s essential to recognize that, in this complex financial dance, traditional banks weren’t the direct lenders to the fossil fuel industry. Instead, they assumed the role of guides, offering invaluable advice to oil companies seeking financing from private investors. This nuanced involvement allowed these banks to influence the trajectory of fossil fuel projects without directly lending their financial resources.

The shockwaves created by this revelation served as a profound wake-up call to both the financial sector and the wider public. The inherent connection between traditional banks and fossil energy exploitation was exposed, triggering a collective realization of the need for transformative change. The traditional banking system’s inadvertent endorsement of environmentally detrimental practices sparked a wave of discontent and a demand for alternative financial models that aligned with sustainable values.

In response to this awakening, a new breed of financial institutions emerged – green neobanks. Among them, notable names like Green-Got and Helios took center stage. Driven by a mission to redirect market shares away from traditional banks deeply entrenched in fossil energy exploitation, these neobanks sought to be pioneers in fostering a financial environment that aligned with eco-conscious principles.

The birth of these neobanks can be seen as a direct response to the urgent need for financial institutions that not only abstain from actively participating in the fossil fuel industry but actively work against its perpetuation. Their mission extends beyond profit margins; it encompasses a commitment to redirecting financial resources towards sustainable, eco-friendly ventures.

Green-Got’s Emission Reduction Claims

Green-Got, founded in 2020, stands out with its bold claim that the liquid assets deposited in their current accounts generate significantly fewer emissions compared to traditional banks. Maud Caillaux, co-founder of Green-Got, passionately emphasizes that one euro with Green-Got produces four times fewer carbon emissions than its counterpart from a major French bank. The core foundation of Green-Got’s projects revolves around the reduction of carbon emissions and the preservation of biodiversity.

Diving into the specifics of their initiatives, recent projects include a commendable effort in reforesting a Brittany forest following the devastating wildfires in 2022. Additionally, Green-Got has ventured into sustainable energy by contributing to the establishment of a solar power plant in India. Caillaux expresses her vision for the future, hoping to introduce savings accounts to Green-Got’s offerings. Currently, the neobank provides life insurance, professional accounts, and joint accounts, but a broader financial portfolio seems to be on the horizon.

On the other hand, Helios, another French neobank established in 2020, takes a different stance by choosing not to offer savings accounts. The rationale behind this decision, as explained by Maeva Courtois, co-director of Helios, revolves around the complexities associated with regulatory requirements. Courtois points out that savings accounts come with rules and are not entirely managed by the bank issuing them, presenting a unique challenge in the evolving landscape of green finance. Furthermore, a November 2023 law introduces the curious possibility of French savings accounts financing the defense industry, adding another layer of complexity to this financial terrain.

The Financial Impact of Green Neobanks

While the endeavors of French neobanks are commendable, having collectively financed projects totaling €6 million since 2020, one cannot help but question the magnitude of this contribution in the grand scheme of combating climate change. In a report earlier this year, esteemed economist Jean Pisani-Ferry and finance controller Selma Mahfou estimated that approximately 2% of an entity’s GDP is required to successfully fund the green transition. For France alone, this translates to a staggering €60 to €70 billion annually.

However, it is crucial to recognize that green neobanks are still in their nascent stages within the finance sector. Green-Got, for instance, claims to have gathered an impressive 62,000 clients and processed €327 million in transactions since its inception three years ago. These figures hint at the potential for growth and the ability to attract a larger clientele over time, underscoring the possibility of these neobanks evolving from niche players to significant contributors in the fight against climate change.

The Banking License Dilemma

Despite their aspirations and potential, a significant hurdle impedes the capacity of green neobanks to compete with traditional banks – the absence of a banking license. This critical license is the key to unlocking various financial services, including the ability to offer mortgages to clients. Without this licensure, neobanks find themselves restricted in providing a comprehensive suite of financial services, limiting their potential impact.

In conclusion, the emergence of green neobanks signifies a promising step towards environmentally conscious finance. However, the real question lies in the extent of their impact on the fight against climate change. As these neobanks navigate through regulatory complexities, build their client base, and potentially acquire banking licenses, they hold the potential to transition from being niche players to substantial forces reshaping the financial industry’s approach to sustainability. The journey ahead is uncertain, and only time will reveal whether these neobanks are a fleeting trend or a lasting solution in the global effort to address the pressing challenges of climate change.