Governance, risk & compliance
Beyond sustainable mortgages, many lenders are also offering loans for homeowners to make their properties greener.
100-fold
The amount at which green financing has increased in the past decade. The market is today worth $540bn annually.
TheCityUK/BNP Paribas $324bn
Europe’s contribution to that market,
cementing its position as the world leader.
Bloomberg 50
a loan or mortgage – but with environmental credentials attached to them. In practice, Swiss banking giant UBS began offering so-called ‘Green Mortgages’ back in 2021. Buyers or owners of properties with bosting ‘recognised sustainability certificates’ could then secure a discount when taking out a sustainable mortgage. Finland’s Nordea Bank also offers financing options for customers wanting to invest in assets with sustainability credentials – such as electric vehicles, or renovation work that improves the energy efficiency of a property. ING is at the centre of these developments too. In 2021, it announced it had joined the UN’s Net-Zero Banking Alliance (NZBA), which comprises 40% of global banking assets and 300 signatories. The group is committed to aligning its lending and investment portfolios with net-zero emissions by 2050, using robust, science-based guidelines to accelerate the implementation of decarbonisation strategies under the umbrella of the UN’s Environment Programme (UNEP). “We’ve established some of the most important sustainability-oriented frameworks within the finance industry to bring together the UN with a global group of banks, insurers and investors to develop the sustainable finance and responsible investment agendas,” explains Eric Usher, head of the UNEP Finance Initiative. The programme currently provides global sustainability leadership to more than 450 financial institutions, together boasting assets of over $100tn. Among other things, ING will use its Terra approach to help achieve NZBA goals by financing new energy technology areas, such as hydrogen, carbon capture and energy storage. It’s therefore clear the banking sector – or anyway a large part of it – is making a real commitment to customers and the climate alike. All the same, regulators and governments also have a role to play
too. Usher says it’s important they understand the roles, potentials and policy needs of financial institutions, and how they can steer the sector to become an enabler of change. Castelnau says one such example could be the role housing might play in improving sustainability: “If we want to have a massive impact, we also need the right framework.” Usher adds that by undertaking voluntary initiatives, the private finance sector is signalling to regulators it is “ready to take steps to evolve their businesses, help drive sustainable change in the real economy and deliver the sustainable outcomes that the planet needs.” This is, moreover, a message that is cutting through. “We’ve seen, over the past two or three years, a tsunami of regulation,” Castelnau says, “and that’s a lot to deal with, but also very helpful. What we really ask for is regulation that’s harmonised to advance markets in which we operate.” One example is the Corporate Sustainability Reporting Directive, which requires companies across the EU to report their absolute emissions – a move that will allow financial services providers to better target their support. Overall, Castelnau believes banks can help tackle climate change: but they can’t do it alone. “We need our clients to take action,” she says. “We also sometimes need help from others, like government and regulators. So, we call on regulators to ensure we have the right frameworks.” Certainly, rule makers are hastening their efforts to require banks to bolster their sustainability credentials, and to support the energy transition by being more proactive in ensuring their lending decisions are as green as possible. Banks, for their part, are using science and data to facilitate this – and are increasingly happy to market their sustainable credentials to eager audiences. The IPCC’s call to action, in short, is not going unanswered. ●
Future Banking /
www.nsbanking.com
Clare Louise Jackson/
Shutterstock.com
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