What are the trends that will shape ESG FinTech in 2025?
Opinions on ESG can be quite divisive and some countries are looking to increase their focus on sustainability and equality, while others are looking to move away. With an evolving landscape, how optimistic are industry players for the success of the sector in 2025?
Last year was a busy year for ESG, with the EU, USA and Canada all introducing significant changes to ESG reporting regulations. The biggest shakeup was caused by the EU’s CSRD which brought significant changes to the ESG reporting that firms must complete. The regulation requires firms to complete annual sustainability reports, disclose information about their ESG practices and complete double materiality reports.
However, not all countries were quick to meet the deadline of the regulation. The European Commission issued warnings to 17 member states for failing to comply with the new regulation. CSRD has also caused some dissent within the EU, with French prime minister Michel Barnier calling for a moratorium to pause the regulation’s implementation, with a similar call coming from Germany.
As for the US, there are big question marks over ESG for the next few years. Over thepast couple of years, some states have taken measures to curb ESG, while others have been increasing support. There are also concerns that President Trump will take an anti-ESG stance, with his first week already seeing an intention to increase oil mining and ending diversity hires.
Despite the opposition to ESG, many are still very optimistic for the sector’s future. Position Green’s CEO Daniel Gadd said, “Absolutely. While skepticism around ESG persists, the need for reliable, transparent, and actionable ESG data will only grow as businesses and investors face mounting climate and regulatory pressures. Companies will continue to seek FinTech solutions to demonstrate accountability and unlock value through sustainability.”
Gadd added, “The alignment of ESG with value creation and risk mitigation is becoming clearer, and the regulatory push for transparency ensures ESG fintech will remain essential for businesses navigating these complexities.”
Frazer MacRae, Founder and CEO, Raimac shared a similar sentiment on ESG FinTech’s prospects in 2025. MacRae said, “2025 is poised to build on the successes of 2024, with significant momentum already established in ESG-aligned financial products. As regulators strengthen ESG requirements, businesses and consumers will demand more innovative, transparent, and sustainable payment systems. FinTech companies are increasingly integrating ESG metrics into their offerings, demonstrating value for investors and aligning with customer expectations.”
This convergence of technology and ESG priorities offers a wealth of new growth opportunities for FinTechs. One core example of this, according to MacRae, are programmable payments. These are automated financial transactions that execute when certain criteria are met. They are typically implemented through blockchain technology, and example use cases would be a payment being completed when an item is delivered or a payment completed based on metrics.
MacRae said, “Programmable payments will likely lead this growth, enabling financial transparency and governance accountability. Their ability to support resource efficiency also ties them to environmental objectives. Additionally, partnerships between ESG-focused FinTech firms and traditional financial institutions will drive scalability and market adoption.
“Programmable payments are expected to become a mainstream solution, with applications extending into high-growth industries such as utilities, subscription services, and the gig economy. This aligns with the increasing shift toward subscription-based lifestyles, where customers demand fair, flexible, and transparent financial interactions.”
What are the trends to watch?
The ESG FinTech sector is still in its early stages, and as such, change can happen rapidly. As we look ahead to the next 12 months, there are a few trends that are expected to guide its development.
For Gadd, one of the biggest trends will be an enhanced focus on value creation. ESG FinTech will go beyond compliance and will be able to demonstrate ROI for companies via cost savings and risk mitigation, he explained. Similarly, there will be a greater focus on supply chain transparency and tools that will allow businesses to track and assess business risk, such as regulatory and supply chain impacts.
AI has dominated talk of innovation for many years and Gadd believes it will be much the same in 2025. “The use of AI for predictive ESG risk modeling and scenario analysis will expand, particularly as businesses start to harness qualitative insight from the quantitative data AI helps them to make sense of.” One final trend Gadd pointed to is the rise of sector-specific solutions.
As for Position Green’s own 2025, the company has some major developments planned. At the top of this list is the launch of advanced AI-driven features that will offer predictive risk assessments and real-time ESG insights. The company also plans to enhance its Scope 3 emissions tracking capabilities and expand integrations with frameworks like GHG Protocol, CBAM and ISSB.
Finally, Position Green plans to release sector-specific solutions tailored to industries with complex supply chains, such as retail and manufacturing.
In terms of sector defining trends, Mary Beighton, Director of People and Culture at Manchester-based Zuto, also offered some predictions. Beighton sees the importance of data and ratings rising throughout the year.
“In 2025, there will be greater need for data and ratings services such as energy consumption and carbon emissions calculators to ensure compliance. The UK Financial Conduct Authority (FCA), for example, is preparing to regulate providers in this space in the coming year to ensure consistency and best practice.
“An area that FinTechs, especially, will need to examine is energy consumption associated with their digital, software and storage platforms. At Zuto we’ve been tracking the effects of our use of software on our carbon footprint. We currently estimate that software, cloud and digital marketing accounts for around 40% of our overall Scope 3 emissions. We would expect other FinTechs to see similar results.”
The increased adoption of AI is another area FinTechs will need to assess in terms of energy consumption and emissions. AI solutions, particularly large language models, consume a lot of energy and electricity to use and could have significant impacts to a company’s carbon footprint. Beighton said, “Studies have estimated that large tech firms such as Google, that have embedded AI throughout their search technology and software, are likely to consume as much electricity as a small country. FinTechs will need to take this into account when deploying AI, to determine how much they can afford to use it – financially and ethically.”
MacRae also offered some trends they see playing a major role in ESG FinTech this year. In addition to programmable payments, they see an increase in transparency through smart contracts. “Automation will enhance trust in financial transactions, especially in industries prone to disputes or fraud, such as real estate and cross-border payments.”
Another trend will be greater financial inclusion through digital ecosystems, MacRae said. More platforms will focus on providing affordable financial access for underserved markets by utilising mobile technology and digital wallets.
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January 28, 2025 at 06:18PM