Long reads

How Gen Z is driving sustainability across fintech

Sehrish Alikhan

Sehrish Alikhan

Reporter, Finextra

The up-and-coming generation of young adults that were born between 1995 and 2010, popularly known as Gen Z, has been at the forefront of green ambition and combatting climate change. Activism has been popular among this generation not as a mere trend, but as a genuine and passionate interest in safeguarding their future and the future of this planet. As a result, Gen Z’s tenacity and commitment to sustainability is leaving a permanent mark on international corporations and the financial industry.

A study by Reconomy details how Gen Z has been impacting sustainable efforts in the financial sector. Studies featuring Gen Z individuals, who are now employees and consumers, reveal that they have long-standing commitment in green brands and carbon-friendly corporations. Reconomy reported that 63% of Gen Z feel the pressure of climate change in their day-to-day lives. As the generation most impacted by global warming and climate issues, the consequences of environmental damage waged by older generations serves only to harm their future.

Pew Research performed a study on the Gen Z population based in the US, revealing that the climate change movement is largely youth-led, and those not only speaking more about environmental issues through activism and social media, but also acting to combat climate change, are by majority from Gen Z. A higher percentage of Gen Z adults (32%) and millennials (28%) have been voting, donating money, contacting officials, volunteering, or attending rallies that address climate change compared to Gen X and Baby Boomers.

How are consumer habits changing?

The covid-19 pandemic caused a major disruption to the financial industry and its impact on Gen Z is likely to be greater than for any other age group, according to Forbes. The pandemic also acted as a catalyst for the sustainability movement, shaping consumer habits of those who rose into adulthood during major lockdowns.

According to Jenny Folley, founder and CEO of flexible workspace company @WORKSPACES, workers returning to workplaces post-pandemic are demanding more eco-friendly work environments. As a result, Folley states that “Gen Z and millennials are definitely driving workplaces to operate more sustainably. They are asking their employers to support charities and causes that focus on sustainability. They are also driving the push to utilise materials and providers that are more ethical and eco-friendly.”

She continues: “Businesses are actively seeking out ways to green up their operations, such as removal of plastics, recycling paper, purchasing second-hand furniture and pre-loved equipment, using materials made from eco-friendly products and production processes.”

As consumers, Gen Z are more environmentally friendly and mindful of their carbon footprint. A whitepaper released by Credit Suisse analyses how Gen Z act as consumers, revealing that they are making consciously eco-friendly retail decisions, from investing in sustainable energy sources and using less environmentally damaging vehicles, to dialing back on fast fashion brands and eating more plant-based foods. As Gen Z already make up 54% of the world's population and by 2040 will be the highest earners and spenders alongside millennials, their consumer habits will have a significant impact on the sustainable development of retail companies.

Gen Z are more likely to take ethical and moral values into account when making retail purchases, and are willing to spend 10% more on eco-friendly products, reports a study on Gen Z’s consumer habits by First Insight and the University of Pennsylvania. More and more leading brands are transitioning to more sustainable methods or taking part in the sustainability movement as a result of the upcoming generation’s dedication to staying green. In the future, Gen Z is most likely to flag corporations that are not maintaining sustainability needs. The study also indicated that the percentage of Gen X who prefer buying from brands based on their sustainability has increased over 25% in the last year, indicating that Gen Z’s consumer habits are influencing other generations as well.

A report by popular clothing reselling site Depop gathered data from 2,000 Gen Z Depop users based in the UK, US, and Australia, finding that 70% are influenced to buy from brands that have fair wages, 60% from brands that are set on reducing their carbon footprint, and 45% from brands that use green materials. Sites such as Depop are popularised by social media platforms like TikTok, using trends to the advantage of shopping sustainably and remaining fashionable. Gen Z has also seen the craze of thrifting resurface, promoting the use of recycled clothes as stylish, fashion-forward decision.

Gen Z employees are invested in the sustainable actions of their workplaces; 64% of 18 to 22 year-olds working in the UK stated that they believed it to be significant that their employers acted sustainably, according to the findings of a 2021 BUPA study.

 How is Gen Z working against greenwashing?

‘Sustainability’ has been said to become more of a trend and a buzzword than an actual movement, with major corporations being accused of greenwashing and falsely portraying their success in shifting towards environmentally-friendly methods.

A study conducted by The Guardian reveals that 90% of the carbon credits produced by nonprofit sustainable development organisation, Verra, which offered carbon offset tokens to major companies such as Gucci, Shell, and easyJet, overcompensated carbon reductions. This revelation indicates that other similar organisations exaggerate their efforts to curb carbon emissions and deforestation.

Growing suspicions over greenwashing have made more consumers skeptical of the labels of ‘green’ and ‘organic’ and have led to the demand for more transparency in the supply chain. Along with Gen Z, regulators are clamping down on greenwashing claims and demanding honesty when it comes to sustainable movements. Regulatory authorities are enforcing the rules of the Paris Agreement and are planning to ensure that corporations reduce emissions by 50%, as per the Science Based Target initiatives (SBTis) requirement.

Where does the future lead?

The emergence of green and sustainable fintechs has also been on the rise, with leading banks forging new efforts to reduce carbon emissions and partner with eco-friendly fintechs in order to stay in the loop for sustainable innovation. The First Insight study also revealed that Gen Z customers have had an increased interest in green finance products, with 45% of retail banking customers looking to switch over to sustainable credit and debit cards, and 31% seeking green loans and mortgages.

Executive vice president of digital transformation firm Publicis Sapient, Dave Donovan comments on Gen Z’s demands for transparency: “Both retail and commercial banks around the globe are implementing sustainable change, aiming to manage customer requirements. Gen Z wants transparency when it comes to their banking information.”

Donovan continues: “Gen Z knows what they want and what they want is to change the world. Being highly informed and engaged with social and environmental issues, they will only do business with organisations that understand and take action on these important points. Responsible investment in companies that want to bring about change is what Gen Z is looking for. Hollow promises are not good enough - Gen Z will expect their banks to uphold principles they value, showing real actions and commitment.”

Gen Z have become trailblazers in the sustainability movement and are transforming the financial industry with their consumer habits. By making their stance on sustainable values and eco-friendly behaviours known, they are influencing both corporations and other generations to commit to paving a better path for the future of the planet.

Comments: (1)

Richard Peers
Richard Peers - ResponsibleRisk Ltd - London 06 February, 2023, 14:521 like 1 like

Great article Sehrish, so true.  But there are plenty of us oldies that are on the case too :)