CCR2 Post-Covid19
Further benefits of environmental
responsibility for credit-seeking customers would be a reduction in cost of credit, and this would encourage more SMEs to become environmentally responsible. By adding another criterion to the
smorgasbord of credit indicators used by lenders, lenders should be able to assess credit better and reduce their losses. The ERCS would be a behavioural
indicator, but unique in that the score would be objectively measurable (through third-party certification, evidence or audit), and consistently comparable between businesses and segments.
Testing Of course, some environmentally respon-
sible businesses will fail, as many businesses involved in Green tech and conservation will fail. The ERCS would need extensive testing before it could be integrated into large-scale credit models. To change cul- ture in the Finance Industry, the results of such testing should be made public so that lenders can build on it with their own analysis and modelling. In the US, the Environmental Credit
Score Foundation has created a score that represents the environmental credit worthiness of an individual or business. They envision an internationally recognized
October 2020
In the US, the Environmental Credit Score Foundation has created a score that represents the environmental credit worthiness of an individual or business. They envision an internationally recognized and accepted environmental credit score that can reflect the environmental footprint of any individual, business or organization
and accepted environmental credit score that can reflect the environmental footprint of any individual, business or organization. The Foundation believes that such a
score could be used as a community service requirement by universities in making admission, scholarship and award decisions. They believe it could also become a factor in hiring decisions, landlord-tenant decisions, and institutional priorities. However, this is just the tip of the iceberg.
www.CCRMagazine.com
Risk appetite Enter the world of Finance! For businesses on the edge of a risk appetite, an ERCS could make the difference between an accept or decline; the difference between a failure and a lifeline. The UK has a history of environmental
innovation, and the Financial Industry should lead on developing a robust and fair ERCS. Swishfund is looking to put together a
small group of thoughtful, committed volunteer businesses, researchers and individuals to change the financial world. If you are interested and can commit
some resource (even just time and ideas), then please contact us as we would be delighted to move this forward with you. An article in the Economist, titled ‘The
Trouble With Green Finance’ (20 June 2020) concludes that: “Climate Finance is still in its infancy. There is a lot of room for improvement.” This is true. A popular Chinese proverb is: “The best
time to plant a tree was 20 years ago. The second best time is now”. Perhaps if we in the Financial Industry
start taking responsibility for planting bulbs and spreading seeds today, as Autumn turns colder and darker, then maybe the flowers will come back in the Spring. CCR2
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