The European ESG fintech landscape has developed rapidly in recent years. As the study ‘Snapshot of the European ESG FinTech environment’ presented by EY and Frankfurt Main Finance at TechQuartier on 12 December shows, the number of ESG fintechs has risen to 371 in 2024, an increase of 27% compared to 2022. However, the financing volume has decreased compared to previous years and stood at 581 million euros in 2023. No figures are yet available for 2024. However, activity around deals for ESG fintechs in Europe increased by 16% in the first quarter of 2024, with Frankfurt as the most active location. Although London, Paris and Berlin remain the largest ESG fintech hubs, Frankfurt is increasingly positioning itself as an up-and-coming location for this sector.
Although Frankfurt is home to a smaller number of ESG fintechs compared to the top hubs, it has special characteristics. For example, the majority of Frankfurt’s ESG fintechs (70%) focus on the B2B market, a higher proportion than in Munich, Paris, London and Berlin. 50% of Frankfurt’s ESG fintechs concentrate on data and rating, which is also a high proportion compared to other cities. The city also accounts for 1.73% of all funding in Europe.
Frankfurt not yet at the finish line for ESG fintechs
Not only are institutions such as the International Sustainability Standards Board (ISSB) and the Green and Sustainable Finance Cluster Germany based in the city. The city has also already become a world leader in the fintech sector in general and, according to the Global Financial Centre Index, is the best-placed German city in 25th place, ahead of Berlin in 29th place. Awareness of sustainability and green issues is also present in the city. Not only has the city of Frankfurt set itself the goal of becoming a European ‘Green City’. According to the Global Green Finance Index, Frankfurt ranks 20th, well ahead of Berlin in 44th place and only just behind Paris in 18th place.
With its proximity to German industry, Frankfurt also offers excellent networking opportunities, especially for the B2B ESG fintechs already based here. This is because thinking in silos is no longer appropriate in the sustainable transformation of the financial world, and integrative approaches are urgently needed.
The Frankfurt financial centre offers opportunities
However, the study also shows that a number of measures are still required in order to realise the diverse existing potential. The visibility of financing opportunities for sustainable business models should be increased and the exchange between financial service customers who require innovative ESG solutions and their providers should be improved. Students in the fields of sustainable and green finance should be supported in setting up their own ESG-related companies and greater use should be made of ESG and sustainable finance-focused accelerator programmes.
Internationally, there are exciting role models for the promotion of ESG fintechs. Sandbox programmes with relaxed requirements within a defined framework and timeframe or more public-private partnerships are just two examples. The opportunities and ideas are there. But only if they are seized and taken up can Frankfurt fully realise its potential.
