Three experts weighed in on whether “green lending” may be the key to achieving a global net-zero economy.
Over the next decades, billions of pounds of investment will be required if the world is to shift to a net-zero economy.
‘Green finance’ is often proposed as the answer to this financial deficit.
At the AltFi Lending Summit, asked the experts for their thoughts and answers.
Simon Cureton, chief executive officer of Funding Options, Susie Aliker, chief executive officer of Tandem Bank, and Tim Coates, co-founder and chief customer and regulatory officer of Oxbury Bank, joined us to debate if green lending is the answer and what more must be done to make it so.
“I think one of the most encouraging things is that interest has been very good,” Cureton said.
“So on average, around 20 per cent of our demand is from businesses that self-identify as either being green themselves or having a green need or a need for green finance.”
Approximately the same number of firms in the asset financing product category desire to finance an asset with reduced carbon emissions, he noted, which is what attracts businesses to Funding Options.
The lending marketplace began its green financing marketplace a little over a year ago, and although it is encouraging that many firms are seeking “competitive choice,” Cureton said that this is the difficulty.
“Whilst the demand has been strong, and very encouraging, we are still faced with quite limited supply on the lender side,” Cureton said.
“But it’s all about how you incentivise not just the SMEs themselves to reduce their carbon emissions, but how do you incentivise the lenders to bring products to the market that can actually satisfy that demand?”
For Oxbury, the only specialised agricultural bank in the United Kingdom, the need for incentives is equally crucial.
“It’s important for us to be incentivising our current and prospective customer base,” Coates said.
“And this is where fintech I think is really involved, because clearly that is about quality information, data transmission between customer and lender, which enables us to derisk what’s going on. Better information means lower risk.”
It also implies that Oxbury’s bank is on track to break even by the end of the year, with an optimistic expectation for complete profitability the following year.
Aliker, who will soon give over the bank’s leadership to Alex Mollart, has been instrumental in driving Tandem into the green lending area.
She emphasised that despite the fact that energy price spikes might make certain ‘greener’ solutions more appealing and simpler to market currently, it is still a problem for customers in the present environment.
“I think we obviously have to accept the current situation. It is very, very difficult out there,” Aliker said.
The return on investment of green loans might now be more enticing, but the expenses are substantial.
“This is not cheap, for individuals to make that transition, and so I do think we need to look at incentives, information and education to help to encourage it.”
On a bright side, Simon Cureton, CEO of Funding Options, said that despite the fact that the cost-of-living problem impacts SMBs as well, demand has remained “very strong” throughout the last several years of economic turbulence.
In fact, it has risen in the last several years.
“The resilience of businesses and business owners is an incredible thing,” Cureton said.
“And I have no doubt actually that the demand will be at least sustained.”
The difficulty, he continued, would be how to incentivize all six million SMBs, which are responsible for a large amount of carbon emissions.
Despite the fact that certain sectors would naturally seek a solution, how can you ensure that this option is available to all?
Cureton’s response?
“I think there needs to be a lot more done by the various public bodies, government, etc. to really support this,” he said.
“We’ve seen a lot of the stick, and not a lot of the carrot. And I think you absolutely need to have a balance between the two.”
