Fighting Climate Change with FinTech

Abstract

We study the environmental sustainability of individuals’ consumption choices using unique data from a FinTech App that tracks users’ spending and emissions at the transaction level. Using a randomized encouragement design, we show that individuals are likely to purchase carbon calculator services that provide them with detailed transaction-level information about their emissions. However, such a tool does not cause significant changes in their consumption and emissions. On the other hand, services that offset individuals’ emissions by planting trees are less likely to be adopted but prove effective in reducing users’ net emissions. Survey evidence suggests that the ineffectiveness of the carbon calculator is not due to the way the information is computed or delivered—users perceive the app’s information as easy to understand, accurate, new, and accessible. Instead, the lack of effectiveness likely stems from users not viewing climate change as more important than other socio-economic problems to alter their habits. The lack of adoption of carbon offsetting is instead driven by limited attention and users’ desire to directly benefit from the externality associated with having trees planted in their country of origin. Our results show the challenges and opportunities associated with the tools promoting sustainable behavior that were initially confined to specialized FinTech Apps and are now becoming widespread across large financial institutions.

Keywords: FinTech, Climate Change, Household Finance, Sustainable Behavior

JEL Classification: D14, G41, G51