2 minute read
Triodos Bank UK
Avoiding the greenwash
How can you tell if a loan is genuinely sustainable?
Phillip Bate Business Lending Team Lead Triodos Bank UK
With ESG a top priority for many organisations, sustainability has become an increasingly important factor when choosing a source of finance. However, with a lack of clear guidelines on what exactly constitutes a sustainable loan, how can you be confident in sharing with your clients an option that’s genuinely going to make an impact?
Membership bodies such as the Global Alliance for Banking on Values can help signpost the institutions that are using finance to make an environmental and social impact. Reporting that is aligned to globally recognised methodologies is also important – for example measuring the climate impact of loans and investments via the Platform for Carbon Accounting Financials (PCAF) or net zero targets being aligned to the Science-Based Targets initiative (SBTi).
Yet while such schemes offer useful guidance, currently the best means of assessing whether a loan is genuinely sustainable is to look at a bank’s ethos and at its lending and investment portfolio. What percentage of their total balance sheet do they deem sustainable? Does sustainability form part of their mission and underlying principals? And how do they put those values into action?
Look for banks that are transparent about where they lend money and what kind of organisations they support. At Triodos, everything we do is driven by our mission to direct money into positive social and environmental organisations. Plus, we’ve always been clear about where we invest, allowing brokers to judge the impact of our work for themselves and to decide whether we’d be a good fit for their clients. We publish these details on our website.
How we assess sustainability
Although we have sector policies, we take a case-by-case approach to assessing whether an organisation is legitimately sustainable. Some may be heavily focused on environmental impact, while others could be more centred on socially impactful work – or often a combination of both. All loan recipients will contribute to our mission to make money work for positive change, and we work with customers on finding solutions to help them create their impact.
Some examples of recent business loans we’ve provided include support for social housing association SHAL – to build new homes and carry out eco-improvements to existing properties – plus a loan to back YMCA Dulverton Group’s plan to expand its work and increase its impact in the Southwest. Our loan to the Low Carbon Hub will help it to construct and operate the UK’s largest community-owned solar park in Oxfordshire, while loan recipients in the healthcare sector include Rapport Housing and Care, a not-for-profit provider of care homes, supported homes, extra care housing schemes and home care.
Reassurance for brokers
As ESG becomes higher on the agenda, we welcome calls for greater oversight on sustainability across all companies, not just in banking. Environmental claims need to be substantiated and applied across an organisation’s operations, not just on specific products offered.
Tighter regulations and greater transparency will make it far easier for brokers to understand the true nature of a bank’s sustainability and help them to find the right financial partner for clients that prioritise positive social and environmental impact.